Investing in Immigrants - Going Long on Immigrants Since 1776

By Nick Slepko - July 12, 2012 | Tickers: BIG, COST, ROST, SANM, TJX | 0 Comments

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[continued from "Investing in Immigrants - Chlamydia, Lollipops, & the Fortune 500"]

Thirty years ago, Croatian immigrant, Jure Sola, teamed up with Serbian serial entrepreneur, Milan Mandaric – a man already famous at the time as one of the earliest Silicon Valley pioneers.  They launched a company that has become a regular fixture on the Fortune 500, Sanmina-SCI (NASDAQ: SANM).  Beginning with manufacturing printed circuit boards, Sanmina drove the industry into more sophisticated hardware like backplanes and expanded into services and consulting.  (Hopefully Hewlett-Packard is taking notes.)  While Yugoslavia tore itself apart through out the 1990s, the two Slav start-up in San Jose continued to grow into the multi-billion dollar, 50,000 employee corporation it is today.

During Sanmina’s rise, Jure Sola was one of the few CEOs to be identified by the Missouri Fund, a group which grew very rich using an analytic tool that invested in the “exceptional leadership” of certain CEOs like Jim Sinegal of Costco (NASDAQ: COST).  In 2001, the company was so well managed that as the final rounds of the Yugoslav Wars were being fought, Sanmina acquired Huntsville, Alabama’s SCI Systems – a company twice its size.  Sola successfully blended the two entities’ divergent strengths (specialized manufacturing and high-speed assembly), and continued to grow its American workforce while also becoming one of the first firms to successfully capitalize on Chinese labor.  While older Mandaric has since gone on to busy himself with buying sports teams in the US and UK, the younger Sola is now in his mid-sixties, and the main challenge will be in finding and conducting a suitable transition – similar to Sinegal’s recent long retirement.

Still, the success of the foreign born in the Land of Opportunity is not limited to science and technology.  Costco itself exists because of recent immigrants – Sinegal’s business partner, Jeff Brotman is the son of Romanian-Jewish retailers that immigrated to Tacoma, Washington from Canada.  While Sol Price and FedMart are often credited with mentoring and inspiring Sinegal and the current CEO Craig Jelinek, Brotman actually credits the original Costco idea to his late father’s chain of Seattle Knitting Mills.

Another big box major, Big Lots (NYSE: BIG), has its roots in another Sol also descended from Russian Jewish immigrants.  Sol Shenk is one of the modern retail visionaries (whose homilies make him sound a lot like the Buffett of today).  Shenk would often talk and obsess over reducing consumer costs even more than Jim Sinegal does now.  In fact, Big Lots was one of the reasons Costco had difficulty penetrating the Midwestern market on its first attempt in the 1980s.  Shenk’s low prices and love of distress sales inured his region to a certain kind of salesmanship that was decidedly not the passive allure of the West Coast warehouse upstart.  Famously (in a move that sounds like the Costco of today), Shenk once bought 2,800 DeLoreans from a diverter and sold them all in less than two years – for which he was then sued (unsuccessfully) by DeLorean’s court-appointed receiver for lost profits.

(Also, with shades of Costco, John DeLorean was born to Romanian immigrants and rose to be General Motors' youngest executive before starting his eponymous car company which subsequently went downhill after he tried to raise a round of funding through cocaine sales – allegedly.  He was later unsuccessful with his patented monorail for which he had hoped to fund in part through the sale of the DeLorean name as a luxury fashion brand.)

Despite a prescient, but ill-timed, launch of a now defunct local home shopping television channel, when Sol Shenk passed in 1994 at age 83, he had built a billion dollar empire of 700 stores.  (Sinegal still has a decade to add about a hundred more locations to meet Shenk’s benchmark – though Costco’s $40.8 billion market cap dwarfs Big Lots’ $2.6 billion.) Unfortunately, without the scrappy immigrant at the helm the last few decades, Big Lots has been more in the news recently for governance issues typified by dust ups over CEO pay and other problems that have culminated in a lawsuit for supposed insider trading and misrepresentation brought last month by the class action entrepreneurs at the Shareholders Foundation. However, with a share price that has continued to grow (at a zigzag) through the recession, management has kept Big Lots in the game.

As the Age of the Sols waned in the mid-1980s, Brotman and Sinegal were founding Costco around the same time that one of their East Coast rivals, another Fortune 500 member, BJ’s Wholesale Club was birthed from the Zayre venture of the Feldberg family.  The Feldbergs were Jewish immigrant brothers from Russia who also began another Fortune 500 company which has become TJX Companies (NYSE: TJX).

TJX’s two main subsidiaries (TJ Maxx and Marshall’s) along with their third place rival Ross (NASDAQ: ROST) – which also owes its origin and success to Russian Jewish immigrants – have seen steady, unbroken growth since the recession began as investors have placed bets on the nation’s best known deep-discount retailers.  However, despite TJ Maxx’s exposure to Europe, its inclusion of more luxury brand items has been popular with shoppers and analysts alike (its share price has doubled since 2007).  Yet, Ross has stayed true to its original purpose (cheap and Halloween) and seen its share price triple in the same period.

Lest one think like Henry Ford that there is a Jewish conspiracy (in retail), other major department stores with immigrant roots range from Canadian Macon Brock’s Dollar Store to Swede Johan Nordström’s Nordstrom (and he was born so far north he’s practically an honorary Laplander).  Moreover, before one reaches for their lily white cowls to complain about Goldman Sachs (German-Jewish founder), they should note that in 1812 Citigroup sprung from English and German ranks, and its ethnic origins are more the norm in the financial community.

JPMorgan Chase has Austrian roots, though parts of its current name’s antecedents come from that wacky native-born Aaron Burr (his Bank of the Manhattan Company was later absorbed by Chase National Bank, named after the Supreme Court justice whose impeachment Vice President Burr presided over).  Similarly, the Bank of New York Mellon Group though of Scots-Irish origin, eventually incorporated the Bank of New York founded by everyone’s favorite West Indian bastard Alexander Hamilton (who is, incidentally, the inspiration and original victim for the again en vogue “natural born Citizen” clause in the US Constitution.)  So, free your mind, the vast majority of Fortune 500 banking, financial services, and insurance companies with immigrant roots are British or Teutonic in origin (and Anglo-German-American conspiracies have never been very good at controlling anything even as simple as Samoa): 

• American Family Insurance (Swiss)
• Aon (German)
• Bank of America (Italian)
• Fidelity National Financial (English)
• Financial One (English)
• Genworth Financial (Irish)
• Guardian Life Insurance (German)
• International Assets Holding (Russian-Jewish)
• Loews (German-Jewish)
• NYSE Euronext (Portuguese-Jewish)
• Regions Financial (Finland)
• State Farm (German)
• Thrivent Financial for Lutherans (German)
• US Bancorp (Scottish)
• Western & Southern Financial Group (Irish)

However, for those in need of a stereotype and a conspiracy, as the name suggests, the construction powerhouse Tutor Perini was founded by the very Italian Bonfiglio Perini – a stonemason!  (Though they are outranked on the Fortune 500 by Dutch bricklayer-founded Kiewit Corporation.)

[continued in "Investing in Immigrants - Defenders of American Icons"]

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