I used to hunt and fish with the former president of Bethlehem Steel, and while I knew that William E. Corey and Charles Schwab bought Bethlehem Steel prior to World War I for $19 million and pyramided it to over $100 million, I knew that the Great Lakes plant is a newer plant that United States Steel. After the market broke in October of 1929, I, a country lawyer, saved up a little bit, figured that at 28 Bethlehem Steel would yield me between 8 and 10 percent, and I bought some Bethlehem Steel stock for that price, not on margin.

It was not but a few months until it went down to 11. I held the stock for 10 years before it got back to 28. During that time I did not get a cent of dividend on it. And when it got back to 28, I was so disgusted that I sold it. Now, since that time it has been split 3 to 1.

So when this expert said it would go to 130, I figured that would be $390 for the stock I bought at 28 and that went down to 11. So I did not call his viewpoint an escape from reality — I just said I thought he was crazy.

But he was not crazy. Bethlehem Steel not only went to 130, but one day it hit 131. I just got the quotation this morning, and it is 129 1/2.

Unfortunately for him, my farmer friend had more confidence in my judgment than in the judgment of the stock expert, so he sold at 75. But he said, “Whenever I can make a 50 percent profit on what I have bought, I am not hurt and I am satisfied.”

But I do not know how well satisfied he is when he sees it up to 129. I am watching with a great deal of interest to see how long it is going to stay at 129 and 130, or whether or not those who last July, when it was selling at 68 and they said it was going to 130, have started a little quiet movement of letting their stock back into the market and taking the profit, regardless of what you say about the capital gains tax at 25 percent.

That is the only stock I know anything about. I never had but one other transaction on the stock exchange, because after being burnt that badly, I was always afraid of it.

But it did seem to me then, and it seems to me now, that at 130, split 3 to 1, those who are putting their money in it are certainly gambling on a sustained production of steel.

Last summer the industry was operating at 63 percent of capacity, and the former president told me — I do not know how it is now — that Bethlehem Steel could not make net earnings when operating at less than 70 percent of capacity. The entire steel industry now has just gotten up to 86 percent of capacity, which just shows a fair margin of profit on what they are doing. They are way below the 125 million or 130 million tons of steel ingots that they are capable of turning out.

Anybody can pay his money and make his choice as to whether Bethlehem Steel is too high or not. I know how I feel about it.

That is all I have.

This post was republished with permission from Novel Investor.