March 1, 2026
Santa Monica Partners: Letters to Partners 1982–2021:40 Years of "Pink Sheet" Investing
Lawrence J Goldstein and Joseph K Raymond
Larry Goldstein’s 500-page collection of partner letters is a definitive masterclass in the rewards of hunting for "stocks overlooked or ignored by otherwise intelligent investors." Over a 40-year period beginning in 1982, Goldstein’s Santa Monica Partners delivered a phenomenal 16.1% annualized return, a record built on an insatiable curiosity for the obscure and a refusal to follow the herd. While the letters begin in 1982, they represent the culmination of a career that started in the 1960s, giving Goldstein the historical perspective to find "jaw-droppers" — his term for companies where the disconnect between the business reality and the valuation was so extreme that an observer's jaw would drop upon discovering the stock's microscopic market price. He focused on the "dark" and deregistered corners of the market that the institutional world had abandoned, proving that significant alpha exists where there is zero analyst coverage.
10 "Electricity Stories" Where Something Was Happening: Below are 10 unique case studies from the letters and Goldstein’s broader career, beginning with his earliest "war stories" and following the path of the mispricings and catalysts he mastered:
• Texas Pacific Land (TPL): This was a lifelong obsession that began when Goldstein was just 13 years old and bought his first 100 shares. In his letters, he became a vocal activist, pushing the board to stop wasting money on "paltry" dividends and instead use Dutch tender offers to aggressively shrink the float. For Goldstein, TPL was the ultimate royalty machine — the goal was to make every remaining share represent a larger slice of the oil-rich acreage.
• Overnite Transportation: In 1960, as a young analyst, Goldstein found this trucking firm selling at $3.50 while earning $2.26 per share. His boss refused to let him publish a report because it was a "pink sheet" stock, so Goldstein bought it personally. His $3,000 stake eventually turned into over $100,000 as the company moved to the Big Board and was bought out at a massive premium.
• Toys "R" Us: In the mid-1970s, Goldstein recognized a "gem" buried inside the wreckage of the bankrupt Interstate Department Stores. He realized the toy division was a superior business model and loaded up on debt and equity for pennies while the company was in reorganization. After multiple stock splits, his cost basis was effectively four cents per share; by the late 80s, it had become one of the most famous 1,000-baggers in market history.
• Warwick Valley Telephone: This was the quintessential "sum-of-the-parts" arbitrage. While the market ignored this stagnant rural phone utility, Goldstein discovered a quiet limited partnership with Verizon. He realized this single "hidden" asset was worth $100–$200MM — multiples of the entire company's market cap — proving that in the pink sheets, the "core" business is often just a wrapper for a much more valuable asset.
• Peter Kiewit & Sons / Level 3: Goldstein spotted a rare Class D share in the pink sheets belonging to the massive, employee-owned construction giant Kiewit. He loaded up between $40-$44, correctly betting on a massive corporate reorganization. When the assets were carved out to form Level3 Communications, the stock "launched like a rocket," opening at $70 on the NASDAQ and nearly doubling his money in weeks.
• The Mutual-to-Stock "Depositor" Strategy: Goldstein treated bank conversions like a systematic printing press. He would identify mutual credit unions preparing to go public and have his partners open local savings accounts just to gain priority status. This allowed them to buy IPO stock at "dirt cheap" valuations — often 50% of tangible book value — with a massive built-in margin of safety.
• International Speedway: This was a multi-decade compounding machine found in the weeds. Goldstein began buying when it was a tiny, illiquid racing micro cap with a total market value of just $3.5 MM. He recognized the dominant competitive moat of its tracks long before NASCAR became a cultural phenomenon, watching that initial $3.5 MM value balloon into a $2.2 B empire.
• Adrian Steel: When a fair price wasn't offered during a corporate cleanup, Goldstein didn't just walk away; he used the court system to trigger appraisal rights. It required years of legal grit and standing his ground, but he eventually forced a significantly higher payout for his partners by refusing to accept management's lowball offer.
• Compass Knowledge: During the 2009 panic, this "dark" stock traded at a P/E of 0.95x while sitting on cash equal to 80% of its market cap. When management tried a 1-for-25,000 reverse split to squeeze out small holders, Goldstein registered single shares in his partners' names to stay in the game. He caught a market maker with a stale quote and banked a $250,000 profit in a single morning.
• Balchem: Goldstein found this chemical micro cap in 1987 when it had only $6.8 MM in revenue. He identified a proprietary encapsulation technology that acted as a massive barrier to entry. Buying at an adjusted cost of $0.41, he held for over 30 years as it compounded into a multi-billion dollar giant. It is the definitive proof that while "getting rich" in these stocks is certain if you're right, it is a slow, disciplined burn that requires the stomach to hold for decades.
The Regulatory End of an Era: Rule 15c2-11: The book concludes with a warning about the SEC's Rule 15c2-11 amendment. By prohibiting broker-dealers from providing public quotes for companies without current financials, the rule has effectively moved these "dark" stocks to the Expert Market. While not technically impossible to navigate, this rule has fundamentally fenced off the "pink sheet" frontier that Goldstein spent 40 years exploring.
Expert Insight: For a deeper dive into Larry’s fascinating history — including how he bought his first 100 shares of TPL at age 13 and his early-stage backing of Murray Stahl — I highly recommend the 2024 IBA Interview with Larry Goldstein. It is an hour and 40 minutes of pure wisdom on everything from Phil Fisher’s influence to finding stocks with a P/E of less than 1.