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J K Lasser s Pick Stocks Like Warren Buffett 1st Edition
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CCC-Boroson FM (i-x) 8/28/01 1:25 PM Page i

J.K. LASSER’S™

PICK
STOCKS LIKE
WARREN BUFFETT
CCC-Boroson FM (i-x) 8/28/01 1:25 PM Page ii

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CCC-Boroson FM (i-x) 8/28/01 1:25 PM Page iii

J.K. LASSER’S™

PICK
STOCKS LIKE
WARREN BUFFETT
Warren Boroson

John Wiley & Sons, Inc.

New York • Chichester • Weinheim • Brisbane • Singapore • Toronto
fcopyebk.qxd 10/10/01 5:00 PM Page iv

Copyright © 2001 by Warren Boroson. All rights reserved.

Published by John Wiley & Sons, Inc.

Quotations from Philip Fisher are from Common Stocks and Uncommon Profits,
by Philip A. Fisher. Copyright© 1996. Reprinted by permission of John Wiley &
Sons, Inc.

Brief quotations from Ben Graham are from pp. 94, 96, 100, 101, 106, 109, 110, 284,
of the The Intelligent Investor Fourth Revised Edition, by Benjamin Graham.
Copyright© 1973 by Harper & Row, Publishers, Inc. Reprinted by permission of
HarperCollins Publishers, Inc.

No part of this publication may be reproduced, stored in a retrieval system or

transmitted in any form or by any means, electronic, mechanical, photocopying,
recording, scanning, or otherwise, except as permitted under Sections 107 or 108 of
the 1976 United States Copyright Act, without either the prior written permission
of the Publisher, or authorization through payment of the appropriate per-copy fee
to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978)
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This publication is designed to provide accurate and authoritative information in

regard to the subject matter covered. It is sold with the understanding that the
publisher is not engaged in rendering professional services. If professional advice
or other expert assistance is required, the services of a competent professional
person should be sought.

This title is also available in print as 0-471-39774-1. Some content that appears in
the print version of this book may not be available in this electronic edition.

For more information about Wiley products, visit our web site at www.Wiley.com
CCC-Boroson FM (i-x) 8/28/01 1:25 PM Page v

Contents

Introduction: What Investors Can Learn from Warren Buffett vii

1 It’s Easy to Invest like Warren Buffett 1

2 The Achievement of Warren Buffett 9
3 Buffett: A Life in the Stock Market 17
4 The Influence of Benjamin Graham 23
5 The Influence of Philip Fisher 33
6 How Value and Growth Investing Differ 45
7 Buffett’s 12 Investing Principles 53
8 Don’t Gamble 55
9 Buy Screaming Bargains 61
10 Buy What You Know 69
11 Do Your Homework 73
12 Be a Contrarian 77
13 Buy Wonderful Companies 83

v
CCC-Boroson FM (i-x) 8/28/01 1:25 PM Page vi

vi CONTENTS

14 Hire Good People 91

15 Be an Investor, Not a Gunslinger 97
16 Be Businesslike 115
17 Admit Your Mistakes and Learn from Them 121
18 Avoid Common Mistakes 127
19 Don’t Overdiversify 135
20 Quick Ways to Find Stocks That Buffett Might Buy 141
21 William J. Ruane of Sequoia 145
22 Robert Hagstrom of Legg Mason Focus Trust 153
23 Louis A. Simpson of GEICO 157
24 Christopher Browne of Tweedy, Browne 161
25 Martin J. Whitman of the Third Avenue Funds 171
26 Walter Schloss of Walter & Edwin Schloss Associates 177
27 Robert Torray of the Torray Fund 185
28 Edwin D. Walczak of Vontobel U.S. Value 197
29 James Gipson of the Clipper Fund 205
30 Michael Price of the Mutual Series Fund 209
31 A Variety of Other Value Investors 221
32 Putting Everything Together 237
Appendix 1 Wanted: Cheap, Good Companies 243
Appendix 2 Berkshire Hathaway’s Subsidiaries (2000) 245
Appendix 3 Quotations from the Chairman 246
Appendix 4 “65 Years on Wall Street” 255
Appendix 5 Martin Whitman on Value Versus Growth 265
Appendix 6 A Weekend with the Wizard of Omaha: April 2001 268
Appendix 7 “If You Own a Good Stock, Sit on It.”—Phil Carret 274
Glossary 279
Index 283
CCC-Boroson FM (i-x) 8/28/01 1:25 PM Page vii

Introduction:
What Investors
Can Learn from
Warren Buffett

erkshire Hathaway’s stock has risen nearly 27 percent a year for

B the past 36 years. For its consistency and profitability, this com-
pany, managed by Warren E. Buffett of Omaha, has been amazing.
If you asked Buffett how you, as an individual investor, could go
about imitating his spectacularly successful investment strategy, his
answer would be: buy shares of Berkshire Hathaway. He happens to
be an unusually sensible person, and that is clearly the best answer.
But if you buy or intend to buy other stocks on your own, either
one-at-a-time or through a managed mutual fund, there is much that
you can learn by studying Buffett’s tactics.
Why not just do the obvious and put all your money into Berkshire
Hathaway stock? One reason: It’s mainly an insurance holding com-
pany—Buffett is an authority on insurance. Because of this, the
stock has virtually no exposure to many areas of the stock market,
such as technology and health care. A second reason: Berkshire has
become so enormous that its future performance is handicapped,
much like the odds-on favorite in a horse race being forced to carry
extra weights.
In short, you might do better on your own. First, because you have
a smaller, more nimble portfolio. And, second, because you might
shoot out the lights by overweighting stocks in whatever field you’re

vii
CCC-Boroson FM (i-x) 8/28/01 1:25 PM Page viii

viii INTRODUCTION

particularly knowledgeable about—health care, technology, bank-

ing, whatever. Buffett refers to this as staying within your “circle of
competence.” (There’s nothing wrong, of course, with your also buy-
ing Berkshire stock. I have. The Sequoia Fund, run by friends of Buf-
fett’s, has one-third of its assets in Berkshire.)
While the average investor can learn a thing or two from the mas-
ter, he or she simply cannot duplicate Buffett’s future or past invest-
ment performance. One obvious reason: Buffett has the money to
buy entire companies outright, not just a small piece of a company.
He also buys preferred stocks, engages in arbitrage (when two com-
panies are merging, Buffett may buy the shares of one, sell the
shares of the other), and buys bonds and precious metals. He’s also
on the board of directors of a few companies Berkshire has invested
in. Perhaps the most difficult thing for individuals to duplicate is
Buffett’s small army of sophisticated investors around the country
who fall all over themselves to provide him with “scuttlebutt” about
any company he’s thinking of buying. Also, Buffett has the word out
to family-owned businesses: “I’ll buy your company and let you keep
running it” (another thing individuals can’t duplicate).
Let’s not forget, too, that Buffett also happens to be extraordinar-
ily bright, a whiz at math, and to have spent his life almost monoma-
niacally studying businesses and balance sheets. What’s more, he
has learned from some of the most original and audacious invest-
ment minds of our time, most notably Benjamin Graham.
Still, while it’s true that trying to emulate Pete Sampras or the
Williams sisters does not guarantee that you will wind up in Wimble-
don, you could very likely benefit from any of the pointers they
might give—or from studying what it is they do to win tennis
matches.
Buffett has often said that it’s easy to emulate what he does, and
that what he does is very straightforward. He buys wonderful busi-
nesses run by capable, shareholder-friendly people, especially when
these businesses are in temporary trouble and the price is right. And
then he just hangs on.
There is, in fact, a whole library of books out there about Buffett
and his investment strategies. There are Berkshire web sites, Inter-
net discussion groups, and annual meetings that are beginning to re-
semble revival meetings. There is also a Buffett “workbook” that
helps people invest like Warren Buffett. It even includes quizzes.
This book isn’t written for the Chartered Financial Analyst or the
sophisticated investor (readers familiar with Graham and Dodd’s Se-
curity Analysis). It is for ordinary investors who know that they
could do a lot better if they knew a little more. And the truth is,
CCC-Boroson FM (i-x) 8/28/01 1:25 PM Page ix

INTRODUCTION
ix

much of Buffett’s investment strategy is perfectly suited for the

everyday investor. His advice, which he has been generous in shar-
ing, is simple and almost surefire.
Buffett buys only what he considers to be almost sure things—
stocks of companies so powerful, so unassailable, that they will still
dominate their industries ten years hence. He confines his choices to
stocks in industries that he is thoroughly familiar with. He will seek
out every last bit of information he can get, whether it’s a company’s
return on equity or the fact that the CEO is a miser who takes after
Ebenezer Scrooge himself. He scrutinizes his occasional mistakes,
quickly undoes them, and tries to learn lessons from the experience.
While he is loyal to the management and employees of companies he
buys, he is first and foremost loyal to his investors. To Warren Buf-
fett, the foulest four-letter word is: r-i-s-k.
Beyond that, he avoids making the mistakes ordinary investors
make: buying the most glamorous stocks when they’re at the peak of
their popularity; selling whatever temporarily falls out of favor and
thus following the crowd (in or out the door); attempting to demon-
strate versatility by buying all manner of stocks in different indus-
tries; being seduced by exciting stories with no solid numbers to
back them up; and tenaciously holding onto his losers while short-
sightedly nailing down the profits on his winners by selling.
In short, as Buffett has modestly confessed, the essential reason
for his success is that he has invested very sensibly and very ratio-
nally.
Another way of putting it: Buffet invests as if his life depended on
it.
A word of warning: Not all of Buffett’s strategies should necessar-
ily be imitated by the general investing public, in particular Buffett’s
penchant for buying only a relatively few stocks. A concentrated
portfolio, in lesser hands, can be a time bomb.
There are some things that geniuses can (and should) do that
lesser mortals should be wary of; there’s a law for the lion and a law
for the lamb. Ted Williams, the great baseball slugger, never tried to
bunt his way onto first base, even during the days of the “Williams
Shift,” when players on the opposing team moved far over to the
right side of the field to catch balls that Williams normally whacked
down that way. He wasn’t being paid to bunt toward third base and
wind up with a mere single, much the way Warren Buffett isn’t ex-
pected to do just okay. But you and I, not being quite in the same
class as those two, should be perfectly content with getting on base
consistently using such unimpressive techniques as bunt singles.
No doubt, overdiversification—owning a truckload of different se-
CCC-Boroson FM (i-x) 8/28/01 1:25 PM Page x

x INTRODUCTION

curities—is something that gifted investors should steer clear of. But
underdiversification, owning just a few securities, is something that
ungifted investors (in whose ranks I happily serve) should also avoid
like the plague.
In 1996 there appeared a short, charming book with a cute title:
Invest Like Warren Buffett, Live Like Jimmy Buffett: A Money
Manual for Those Who Haven’t Won the Lottery (Secaucus, NJ:
Carol Publishing Group, 1996). The author is a Certified Financial
Planner, Luki Vail.
The text talks about the blessings of an investor’s owning a diver-
sified portfolio, not a concentrated portfolio. Writes the author, “Di-
versification of your investment dollars along with appropriate time
strategies are your best tactics to protect you against such things as
stock market crashes.” (“Time strategies” means suiting your portfo-
lio to your needs. If you think you’ll need your money in fewer than
five years, go easy on stocks.)
Why buy mutual funds? “Here is your chance to own stocks in 50
to 75 companies.”
“Generally, stay away from individual stocks until you have about
$250,000 to invest; then you can have a well-diversified portfolio, like
your own personal mutual fund. That way when a stock takes a nose
dive on you, it will only have a small position in a very large portfo-
lio, and you will take only a small loss, which could possibly be off-
set by the gain of some other stock.”
In brief, she is recommending that readers of her book not swing
for the seats but bunt for singles. That’s no doubt sensible counsel
for her readers, but it is not the Warren Buffett way.
I might offer a compromise suggestion: The ordinary investor, the
lesser investor, might have a core portfolio of large-company index
funds composing 50 percent or more of the entire stock portfolio.
(Buffett has recommended that tactic for most investors.) And out-
side the core portfolio, the lesser investor might swing for the seats
by imitating the strategy of the man generally acknowledged to be
the greatest investor of our time.

Warren Boroson
Glen Rock, N.J.
CCC-Boroson 1 (1-44) 8/28/01 1:26 PM Page 1

CHAPTER 1

It’s Easy to Invest

like Warren Buffett

uying shares of Berkshire Hathaway is the easiest way to invest

B like Warren Buffett. While the A shares cost around $70,000 apiece
as of this writing, the B shares sell for only around $2,300 each—
roughly 1/30 of the A shares. The B shares do have their disadvan-
tages. For example, holders have less in the way of voting rights and
aren’t entitled to indicate where Berkshire charitable contributions
go. (Berkshire is unusual in allowing shareholders to recommend
how Berkshire’s charity money should be allocated.) And while you
can convert A shares into B, it doesn’t work the other way around.
Which to buy? Berkshire is nothing if not shareholder friendly,
and Buffett has given this advice: Buy the A shares, if you can af-
ford them, unless the B shares are trading cheaply. “In my opinion,
most of the time the demand for B will be such that it will trade at
about 1/30 of the price of the A. However, from time to time, a differ-
ent supply–demand situation will prevail and the B will sell at some
discount. In my opinion, again, when the B is at a discount of more
than, say, 2 percent, it offers a better buy than A. When the two of
them are at parity, however, anyone wishing to buy 30 or more B
should consider buying A instead.”

1
CCC-Boroson 1 (1-44) 8/28/01 1:26 PM Page 2

2 IT’S EASY TO INVEST LIKE WARREN BUFFETT

An investor might dollar-cost-average into Berkshire’s B shares us-

ing a discount broker. So, for example, in order to build a $13,200 po-
sition, he or she might buy two shares six times a year. Or, if the
buyer is less patient, two shares for three straight months.
It is also a good idea to check whether two leading newsletters,
The Value Line Investment Survey and Standard & Poor’s “The Out-
look,” give the stock a decent rating at the time of purchase, and per-
haps either wait a bit or buy energetically depending on their views.
(Hardly any other analysts cover Berkshire.) As of this writing, Value
Line rated Berkshire, at $70,000 a share, average; “The Outlook”—
whose Berkshire analyst, David Braverman, is probably the very
best—above average.
Another guide: Consider whether the stock is closer to its yearly
high or low. Buying Berkshire low is certainly appropriate for some-
one intending to be a follower of Warren Buffett’s value-oriented in-
vestment strategy.

Buying Individual Stocks

Another practical possibility for Buffett followers is to buy the pub-
licly traded stocks that Berkshire owns—like Coca-Cola, Gillette,
H&R Block, and General Dynamics. (Berkshire is also the sole
owner of various companies, like See’s Candy and GEICO, the insur-
ance company, but these companies are not publicly traded.) Be-
cause of Buffett’s history of purchasing reasonably priced stocks,
these stocks should still be worth buying.
A danger, of course, is that Berkshire may have begun unloading
those stocks, the way it began quietly bailing out of Disney in 2000,
as you are just beginning to purchase them. Another danger is that
your portfolio will be askew: You will have more exposure to certain
stocks and industries than Berkshire itself has. As a result, your
portfolio might be a riskier version of Berkshire.
You can balance out your Buffett-like portfolio with stocks from
the holdings of mutual funds that invest roughly the way Buffett
does, such as Sequoia, Tweedy, Browne Global Value and American
Value, Legg Mason Focus Trust (omitting from the last any technol-
ogy stocks, which Buffett tends to avoid), Third Avenue Value, Clip-
per, Longleaf Partners, Torray, and Vontobel U.S. Value. You can
examine a list of these funds’ recent holdings either by going to their
web sites or by consulting Morningstar Mutual Funds, a newsletter
to which most large libraries subscribe. The list of holdings will be
CCC-Boroson 1 (1-44) 8/28/01 1:26 PM Page 3

BUYING BUFFETT-LIKE MUTUAL FUNDS

3

somewhat outdated, but, again, most of these value stocks should

remain reasonably priced.
You might also balance your portfolio by concentrating on stocks
in industries outside the ones you already have covered in your Buf-
fett-like portfolio, along with foreign stocks, which Buffett also
tends to avoid. For suggestions of foreign stocks to buy, check those
in the portfolio of Tweedy, Browne Global Value.
For U.S. stocks, I would single out health-care stocks because
Berkshire has tended to ignore this entire industry, perhaps because
the stocks have almost always been high-priced or because they are
outside Buffett’s “circle of competence.”
You can also balance out your Buffett-like portfolio with stocks
chosen from the list compiled at Quicken.com by Robert
Hagstrom. He derives this list using his criteria for picking Buffett-
type stocks, Hagstrom being an authority on Buffett’s strategy.
(See Chapter 20.)
For more on Sequoia, see Chapter 21; for Legg Mason Value Trust,
Chapter 22; for Tweedy, Browne, Chapter 24; for Third Avenue
Value, Chapter 25; for Torray, Chapter 27; for Vontobel, Chapter 28;
and for Clipper, Chapter 29.

Buying Buffett-like Mutual Funds

Instead of buying individual stocks, you could buy one or more Buf-
fett-like mutual funds—in effect, having someone else buy Buffett-
type stocks for you. Even granting that Buffett is in a class by
himself, cheap imitations—cheap in the sense of your being able to
buy many shares for a low minimum—aren’t to be sneezed at. These
funds, in some cases, do not deliberately emulate Buffett’s strategy.
For example, Third Avenue Value, under Martin J. Whitman, doesn’t.
Others, to a certain extent, do—notably, Sequoia, Tweedy, Browne

Getting Into Closed Funds

With a fund closed to new investors, you can ask a current shareholder to sign
over just one share to you and use that one share to obtain more shares on
your own. Unfortunately, owners of Sequoia shares have, in my experience,
never evinced any interest in selling shares.
CCC-Boroson 1 (1-44) 8/28/01 1:26 PM Page 4

4 IT’S EASY TO INVEST LIKE WARREN BUFFETT

American Value, Legg Mason Focus Trust, Torray, Longleaf Partners,

and Vontobel U.S. Value.
Which fund most resembles Berkshire? No doubt Sequoia,
which was started by a Columbia Business School friend of Buf-
fett’s and which invests a big chunk of its assets in Berkshire. (Un-
fortunately, Sequoia is closed to new investors.) Table 1.1 shows
Sequoia’s recent holdings.
Sequoia suffered a dismal 1999, along with Berkshire itself and
with many other value funds. But its long-term record is splendid.
Over the past 10 years it has outperformed the S&P 500 by 2.31 per-
centage points, returning 17.56 percent a year.
Which of the other funds most resembles Sequoia? Buffett has
reportedly said that the Clipper Fund is close to his investing
style.
A lesser-known fund that has much in common with Berkshire is
Vontobel U.S. Value, run by Edwin Walczak. He readily acknowl-
edges Buffett’s influence; his portfolio recently had a 5 percent expo-
sure to Berkshire, its fifth largest position. Other stocks in Walczak’s
portfolio that have overlapped with Berkshire: Mercury General,
Gannett, McDonald’s, Gillette, Wells Fargo. The fund is classified by
Morningstar as mid-cap value.
One possible way to search for other funds that imitate Buffett’s

TABLE 1.1 Sequoia’s Holdings (3/31/00)

STOCK % OF ASSETS

Berkshire Hathaway A 31.43

U.S. Treasury note 6.125% 14.98
Freddie Mac 13.09
First Third Bancorp 10.23
Progressive 7.88
U.S. Treasury note 5.5% 6.51
Harley-Davidson 4.00
U.S. Bancorp 2.47
Household International 1.79
National Commerce Bancorp 0.58
Mercantile Bankshares 0.27
Data Source: Morningstar
CCC-Boroson 1 (1-44) 8/28/01 1:26 PM Page 5

BUYING BUFFETT-LIKE MUTUAL FUNDS

5

strategy is to compare their R-squareds, numbers indicating how

closely a fund follows an index.
You might search for a fund with an R-squared close to Sequoia’s.
(If A is equal to B and B is equal to C, then A is equal to C.) The Van-
guard Index 500, which mirrors the Standard & Poor’s 500 Stock In-
dex, has an R-squared of 100. The higher the R-squared, the more
closely a fund mirrors an index. (Table 1.2 lists the R-squareds of
some Buffett-like funds.)

TABLE 1.2 R-Squareds of Buffett-like Funds

FUND R-SQUARED

Sequoia 37
Tweedy, Browne American Value 70
Legg Mason Focus Trust 79
Torray 71
Third Avenue Value 52
Clipper 63
Longleaf Partners 49
Vontobel U.S. Value 27
Data Source: Morningstar

Understanding R-Squared

R-squared measures how much of a mutual fund’s performance is explained by

its similarity to an entire market. If a fund owns large-company stocks, both
growth and value, and they are well diversified by industry, it should have a
high R-squared compared to the Standard & Poor’s 500 Stock Index. Fidelity
Disciplined Equity has an R-squared of 93. A fund that deliberately attempts to
duplicate the Standard & Poor’s 500 might have an R-squared of 99. (The
Vanguard Index 500 Fund, which mirrors the S&P 500, actually has an R
squared of 100.) A fund that is nowhere near as well diversified by industry, or
that buys small-company stocks or foreign stocks, might have a very low R-
squared (compared to the S&P 500, but not compared to other indexes). The
Fasciano Fund, which specializes in small companies, has an R-squared of 64.
Vanguard Emerging Markets Stock Index has an R-squared of 54 compared
with the S&P 500, but 78 when compared to a foreign-stock index.
CCC-Boroson 1 (1-44) 8/28/01 1:26 PM Page 6

6 IT’S EASY TO INVEST LIKE WARREN BUFFETT

Apparently R-squared is simply not a useful guide to identifying

Buffett-like mutual funds, perhaps because the concentrated nature
of some Buffett-like funds loosens their ties to the S&P 500.
Now let’s look at the same funds, zeroing in on (1) concentration,
(2) low turnover, (3) low price-earnings ratios, and (4) low price-
book ratios. (See Table 1.3.) Even with these criteria, it’s hard to tell
which fund is most similar to Sequoia.
Value funds differ from one another because their criteria for as-
sessing what a company is worth may be different. Many managers,
like Buffett, use the current value of future cash flow; others may
check the prices paid for similar companies recently taken over.
Some managers are “deep value”; others, further along the contin-
uum toward growth. Value versus growth investing will be covered
in Chapter 6.
In any case, Buffett-like stocks or mutual funds might constitute
only a portion of your portfolio. Value funds do tend to underper-
form during long stretches of time, and you might do well to own
some good growth stocks and growth mutual funds, along with
Buffett-like stocks, just to keep your portfolio more stable over
the years.

TABLE 1.3 Statistics of Buffett-like Funds

AVERAGE AVERAGE
P/E P/B
FUND CONCENTRATED? TURNOVER RATIO RATIO

Sequoia Yes 12 24.6* 4.9

Tweedy, Browne No 19 20.6 4.1
American Value
Legg Mason Focus Yes 14 33 9.6
Trust
Torray No 33 25.1 4.5
Third Avenue No 5 25.8 2.9
Value
Clipper Yes 63 18.4 4.7
Longleaf Yes 50 19.3 3.2
Partners
Vontobel U.S. Yes 67 19.3 3.6
Value
*Based on 50% or less of stocks.
Data Source: Morningstar
CCC-Boroson 1 (1-44) 8/28/01 1:26 PM Page 7

A SENSIBLE SOLUTION
7

A Sensible Solution
All in all, a sensible solution for a Warren Wannabe is to own:
• Some shares of Berkshire Hathaway
• Some of the individual stocks that Berkshire owns, or other
Buffett-like stocks
• A mutual fund or two that seem Buffett-oriented
CCC-Boroson 1 (1-44) 8/28/01 1:26 PM Page 8
CCC-Boroson 1 (1-44) 8/28/01 1:26 PM Page 9

CHAPTER 2

The Achievement
of Warren Buffett

arren Buffett is widely acknowledged to be the best investor of

W our time. When John C. Bogle, founder of the Vanguard Group,
named three investors who seem to have been able to beat the mar-
ket because of their special gifts, they were Buffett, Peter Lynch
(formerly of Fidelity Magellan), and John Neff (formerly of Vanguard
Windsor).
In the 36 years that Buffett has been the chairman of Berkshire,
its per-share book value has climbed more than 23 percent a year.
(The change in value is the best way to evaluate an insurance com-
pany’s performance.) In 32 of those 36 years, Berkshire has beaten
the S&P, sometimes by astonishing amounts. (See Table 2.1.) The
stock has risen from $12 a share to $71,000 at the end of 2000, an an-
nual growth rate of 27 percent.

Soros’ Dilemma

When Ron Baron, the fund manager, worked for Soros, Soros told him he
wasn’t interested in stock tips. He had too much money to invest. He needed
themes.

9
Other documents randomly have
different content
 CHAPTER X.

A BRIGHT PAIR.

Letter from Mr. Stavanger to his Son.

(Written in Cypher.)

“My Dear Boy,—For you are my dear boy still, although you have
of late caused me a great deal of anxiety. You hardly know how
much I endured until I received your letter from Malta, and even
then I was tormented by a dread of what it might have been found
necessary to do. I allude to the death of the steward, which, to say
the least, was very lucky for us. You wonder how I know this? I will
tell you later on. There is so much to relate that I must start at the
beginning, or I shall get mixed up. First and foremost, the business
is steadily recovering from the shock given to it by the abstraction of
so much portable property. Secondly, my brother has not the
slightest suspicion that there is any reason why Harley Riddell should
not stay where he is, and I am beginning to be of his opinion. This
belief is inspired in me by a strange sequence of circumstances, all
of which seem to point to one conclusion. He must really be a very
wicked man, or Providence would not work so persistently against
him as it seems to do. Everything that could help him and hurt you
is almost miraculously rendered powerless, and everybody whom we
had cause to dread has been promptly removed. How, therefore, can
anyone doubt that Divine vengeance is exacting atonement for some
fearful crime which has not yet been brought to light? This being so,
we are nothing less than the instruments used by Providence for its
own ends, and I regard what you have done as the involuntary
outcome of an inexplicable and unconscious cerebral influence.
 “But now that the aims of Providence are achieved, I beseech you
to assert your own identity and to fight against any impulse to
repeat any one of the dangerous proceedings of the past few
months.

“And now for such news as I have. Perhaps I ought to have

mentioned sooner that your mother and sisters are quite well. Also
that I am in like case both mentally and bodily, now that I know you
to be rid of your enemies. It would have been an awful Damoclean
sword hanging over us if that inquisitive Wear had not been
providentially removed from our path. Then there was my poor old
friend Mr. Edward Lyon. Did you see in the papers anything about his
sudden death while away on his business mission to America? I had
nothing but esteem for him. But I must say that I felt immensely
relieved when the news of his death reached us. He had turned
unpleasantly suspicious just before he sailed, and would most
assuredly have begun to make undesirable inquiries on his return.
But heaven has seen fit to remove him to a better world. That it has
at the same time removed one who might have been the means of
proving Riddell not guilty of the crime for which he suffers is only
another proof to me that he is, as I said before, being made to
expiate some former sin.

“Nor is this by any means all the proof of my theory. You know
Clement Corney? And perhaps you feel uneasy at the mention of his
name. If so, you may set your fears at rest, for he also is numbered
among those who might have been a witness against you, but is not.
A week ago he came to me with a long tale about what he knew and
about what he suspected. You seem to have been imprudently
confidential with him, and to have allowed him to pry into your
affairs far too much. From what he told me I judged him to be a
very formidable witness against you and deemed it advisable to
accede to his demands for money, but looked with anything but
equanimity upon the prospect of having to continue supplying him
with money as long as he chose to blackmail me. I should have been
left no choice in the matter, as exposure, after having gone so far,
would mean ruin. But here Providence once more interposed most
strangely. Last night, on opening my evening paper, I came upon the
account of the inquest on Clement Corney’s body. He had been
jerked from the top step of a ’bus and had broken his neck.

“This is all very strange and wonderful. But the strangest thing of
all has to be related yet. As you will see by the postmark of this
letter, we have come to St. Ives for our holiday. We arrived here on
Monday, and on Tuesday I was walking on the beach and wondering
how you were going on when I saw a group of children become
considerably excited. Going up to them I found that one of them was
holding a bottle which had been washed up by the tide. Seeing that
the bottle was carefully sealed, and appeared to contain papers, I
offered the children a shilling for it. They ran off with the shilling in
high glee, while I secreted the bottle in my dustcoat, and walked
rapidly towards our lodgings with it. I cannot account for the impulse
which prompted these apparently irrelevant actions, except upon the
hypothesis of Providential interference already mentioned. I do not
usually take much interest in the doings of children, and I am not
naturally of a prying, inquisitive disposition, and yet I was anxious to
open that bottle in the privacy of my own bedroom. And now mark
the result.

“That bottle contained papers giving a detailed account of all that

Hilton Riddell, alias William Trace, had done, and was doing, to ruin
you and liberate his brother. What a sneak the fellow has been to
deceive people, and to do the tricky things he was doing. No wonder
he came to a bad end. And how vindictive he must have been to
write down all he wrote on the papers that have so wonderfully been
put in my possession. Why, only one half the details would have
reversed the relative positions of his brother and yourself, if anyone
but me had secured that bottle. It seems miraculous, doesn’t it, that,
after tossing about on the waters of the broad Atlantic, the fragile
receptacle of a deadly secret should have been guided to the only
person who knew how to make a proper use of it? I broke the
bottle, and after reading them destroyed the papers. And what do
you to say to the strange fact that I, who had never been in St. Ives
before, should chance to be there just when that bottle was washed
ashore? Only picture what a calamity it would have been had anyone
but myself stumbled upon it.

“The whole thing has only served to strengthen the belief

expressed nearer the beginning of this letter, and I no longer feel
the slightest qualms of conscience on his behalf. Nor do I feel much
further uneasiness about you. Wear is dead. Mr. Lyon is dead.
Clement Corney is dead. The carefully-prepared proofs against you
which Hilton Riddell consigned to the waves have perished in a more
deadly element, and he himself is powerless to do you further injury
unless the sea gives up its dead. All things taken together, therefore,
you may consider yourself perfectly safe, and I do not think there
would be the slightest risk in your returning to England, and
resuming your duties at the shop. Let me know as soon as possible
whether you intend to do so or not. You will have had sufficient
holiday, and ought to try to make up for all the worry you have
caused me lately.

“One thing puzzles me a little. How did Hilton Riddell get to know
that you were sailing in the ‘Merry Maid,’ and what led him to pitch
his suspicions on you? It couldn’t be all chance, and, but for his
timely extinction things might have been very awkward for you by
this time.

“But enough of this subject. You know all there is to know, and I
know as much as I want to know. Nor do I desire ever to open the
subject again.

“You will be interested to hear that Mr. Leonard Claridge is

violently in love with Ada, and is very anxious to marry her off-hand.
I am just as anxious that the marriage should take place as he is, for
it would be a great thing to have Ada so advantageously settled. She
pretends to turn her nose up at an offer from a grocer. But she is a
very sensible girl, after all, and will reflect that if Mr. Claridge is a
grocer he is not in the retail line, and will be able to provide her with
an establishment quite equal to her mother’s.

“Fanny is likely to be much more troublesome to us. She is very

passionate and intractable, and nobody seems able to manage her
since the night you left home. That night was also the one on which
Wear came to such a sudden and tragic end. It was also the night
on which that governess disappeared, who seemed to have such a
genius for managing Fanny. When I returned home, after seeing you
safe on board the ‘Merry Maid,’ the governess had gone out. It was
odd that she never came back, wasn’t it?”

Yes, it was certainly odd. Indeed, it was the one fly in Mr.
Stavanger’s ointment. Just now the fact did not trouble him, because
he was not aware of it.

At one of the principal hotels in Bombay a young man sat reading

the letter from which the above long extract is given. He would have
been fairly good-looking but for the unpleasant expression which his
reckless indulgence in vicious pleasures and his aggressively selfish
temperament had given him. In height and breadth he somewhat
exceeded the average, but his gait was seen to be clumsy when he
walked, although his proportions were regular enough. His hands
and feet were small and well shaped, his complexion of a clear, but
healthy enough paleness when he condescended to lead an
abstemious life. Just now it was full of tell-tale pimples. His features
were regular; his teeth well-shaped, but slightly discoloured; his hair,
eyes, and expression all as black as they can be found anywhere.

Such was Hugh Stavanger, known on the hotel books as Harry

Staley. He had been to the “poste restante” for his letter, and as his
eyes wandered from one page to another, rapidly deciphering the
contents that would have proved so baffling to anyone not initiated
in the business of Stavanger, Stavanger, and Co., the heavy scowl on
his face gave way to a look of evil triumph, not unmingled with
astonishment.
 “Well, of all the lucky accidents, these beat everything,” he
murmured. “To think of all those people being bowled over like that.
But what a caution the governor is, to be sure, with his talk about
wickedness and Providence. And he really writes as if he believes
what he preaches. There is one thing, though, in which he is quite
right. The sea can’t give up its dead, at any rate not in such a
condition as to be able to speak against me. Hullo! What’s this?
Curse that girl. There is no mistake about her now. She was a spy
when pretending to be governess. She disappeared from our house
the night I sailed. This means that she found out where I was going
to, and set that scoundrel of a Riddell on my trail. Her next
manœuvre was to follow me out to Malta. These people evidently
know who really took the diamonds. And they are moving heaven
and earth to bring me to book. Ah! well! They mean to win. So do I,
and all the odds are now in my favour. They may suspect what they
like, but they haven’t a proof left. As the governor says, Providence
is dead against them. We all know that it’s no use flying in the face
of Providence, so my enemies are foredoomed to disappointment.

“So the governor thinks I had better go home again, and that I
should be quite safe. I don’t exactly agree with him, and I have an
idea that I can work a trick worth two of that. This interesting young
lady, whom I imagine to be Miss Cory, wants to discover my
whereabouts. I have, very foolishly, been running away from her. I
think I will reverse my tactics. It would be completing the good
offices of Providence if I were to permit my enemies to overtake me.
Nay, I will go further than that. I will give them indirect information
of my whereabouts. Then, just when they imagine the hour of their
triumph has arrived, I will remove them from my path with even less
compunction than I felt over Hilton Riddell.

“Yes, the hunted shall turn hunter, and whether it is God or devil
that is helping me, I mean to win.”
 CHAPTER XI.

AN UNEXPECTED ALLY.

Annie trembled violently when she saw Hugh Stavanger

disappearing with the balloon, and for a moment seemed almost
fainting with excitement.

“Courage, my darling,” said her father. “He can hardly escape us

now, for I will at once take steps to have him arrested as soon as
the balloon descends. Now your desire to see this balloon ascent is
partially accounted for. Oh, here is Major Colbrook. Do you know, sir,
the man of whom we are in search is actually in that balloon?”

“Are you sure?”

“Quite sure. We have taken note of his appearance too closely to

mistake any other man for him. We have also heard some news
about him this afternoon, and have secured a witness who saw him
with the stolen diamonds in his possession.”

“By jove, you are getting on. I suppose there had better be no
time lost in seeing after his capture as soon as the balloon descends.
But where, in the name of fortune, is it going to? Why—it’s going
right out to sea!”

Others had noticed also that a catastrophe seemed to be

impending, and intense excitement prevailed, which became
augmented when the balloon was lost sight of altogether. As we
know, darkness came on while the aeronauts were still being whirled
away from the steamer which was to have overtaken them, and they
would have perished but for the opportune arrival of the ss.
“Centurion.”

The Corys were dreadfully disappointed at this fresh freak of fate.

To lose their prize when it seemed so nearly within their grasp was a
blow sufficient to shake their hope of ever being able to help Harley,
for everything worked against them.

“I am afraid your chances of laying your hands on Stavanger,

junior, are gone,” said Major Colbrook, when he called to see our
friends the next morning.

“How so?” inquired Mr. Cory.

“Well, none of the ships that have come in this morning have
sighted the balloon. The probability is that it has come to grief, and
that the men are all drowned or killed. I am sorry for the other
fellows, but sympathy would be wasted on a scoundrel who would
swear another man’s liberty away for a crime he has committed
himself.”

“Perhaps so. But, if Stavanger has perished, the proofs of his guilt
will have been lost with him, and that will be a very serious thing for
us.”

“But you have a witness in the shape of the jeweller, who can
prove that the diamonds were offered to him for sale.”

“There you are wrong. Unless we can secure some of them, we

cannot show reasonable proof that these are the identical diamonds
that were stolen.”

“I think, father, that the sooner we look after that ship-captain the
better. You know we were told that he also had some jewels for sale.
As he was in Hugh Stavanger’s company, I expect he had exacted
them as the price of his silence or his help. If we can find him, it
may turn out that we can do without the diamond merchant’s son.
Our present object must be to expedite Harley’s liberation. The
punishment of the wrong-doers can follow after.”

“Bravo, Miss Cory. You have hit the nail on the head,” exclaimed
the major. “Look here, we know the name of the ship, and that she
has left Malta. Let’s go to the harbour-master, and find out where
she cleared for. You may be able to catch her at the next discharging
port. Before you could overtake the ‘Merry Maid’ now she will be
loaded and away. So you must find out somehow where she is
bound for.”

As Major Colbrook’s advice was considered good, it was acted

upon at once, but the result of the inquiries made was somewhat
disappointing. The “Merry Maid” had gone to Barcelona, and from
there to Gibraltar for orders, and what those orders were would take
some little time to discover.

“Have you the ‘Shipping Gazette’?” inquired the major.

“No, sir; we don’t go in for that much, and I have no recent copies
by me. I’ll tell you what, though; if it is very important that you
should know where the ‘Merry Maid’ is, why don’t you cable to the
owners?”

“A very good idea, if I knew where to cable to,” said Mr. Cory. “But
I have not the slightest notion who the owners are.”

“There I am better informed than you,” put in Annie, eagerly.

“Hilton gave me the name and address of the owners, and I have
them here in my note-book.”

“Capital!” cried the major. “We shall manage it yet. Now for the
address.”

“Messrs. Rose and Gibney, agents, Great Water Street, London.”

 “Good. The next thing is to decide what to say. You don’t want
your own name to figure, I suppose? No? I thought not. Then you
had better cable in my name, and direct the reply to come to my
house.”

After a little delay, the following message was sent to Messrs.

Rose and Gibney:—“At what port, and when, is ‘Merry Maid’ due?”

The answer to this, which had been prepaid, was—“Due at Cardiff,

4th proximo, from Antwerp, to load for Port Said.”

“Splendid. That will suit you to a T,” exclaimed the major. “You can
stay here two or three weeks, to give yourself time to hunt up as
much information as possible about Stavanger. Then, failing success,
you can proceed from here direct to Port Said, and board the ‘Merry
Maid’ in the canal. By the time you get to Cardiff, the vessel might
have started on her voyage, so your surest chance of success lies in
waiting for this Captain Cochrane at his port of destination. And I
think you had better take the authorities into your confidence. They
might help you to find Stavanger.”

It was agreed to follow Major Colbrook’s advice in the main, but

our friends preferred to go on to Port Said without much more delay.

“Hugh Stavanger probably saw us,” said Annie. “If so, he will not
come back to Malta.”

“Perhaps not, but you have no guarantee that your supposition as

to his having seen you is correct. And you will surely not leave here
till news of some sort respecting the balloonists arrives.”

“No; it will be better to wait a little while.”

That a little patience was advisable, was proved when the

particulars of the rescue of the balloonists came to hand. When,
however, the Corys learned that Hugh Stavanger was not returning
to Malta, they left the island for Port Said as soon as it could be
managed. But here they were baffled again, as by the time they
landed, the man whom they sought was already on his way to
Bombay, and no efforts of theirs could discover a trace of him.

“We must remain here now until the ‘Merry Maid’ arrives,” said
Annie. “Meanwhile, it strikes me that we have been acting very
clumsily. To give a different name to ship captains and hotel
proprietors is not enough. We must disguise ourselves effectually. It
is quite possible that Hugh Stavanger recognised me at Valetta, and
that but for that misfortune he would have been brought to book by
this time. Such a blunder must not be made again. We have a great
stake to play for, and we intend to win.”

“You are right, Annie. If the fellow suspects us, he will look out for
us, so we must circumvent him by losing ourselves, as it were.”

The result of the conversation that now ensued between father

and daughter was a complete change in the appearance of both of
them, and those who could recognise Mr. Cory or his daughter in the
elderly clergyman who was supposed to be the tutor and travelling
guide of the rather delicate-looking young Englishman who
accompanied him would have to be extremely wide-awake. There
was no cessation of watchfulness on the part of the so-called Rev.
Alexander Bootle and Mr. Ernest Fraser. But very little that was of
special interest to them occurred during their stay in Port Said, and
they were very glad when at last the “Merry Maid” appeared in the
port. Duly armed with the necessary authority, the Rev. Mr. Bootle,
accompanied by an officer of the law, went on board the steamer
the moment it was possible to do so, his object being the arrest of
Captain Cochrane, on the charge of being accessory after the fact to
the great diamond robbery in Hatton Garden.

Picture his dismay on discovering that Captain Cochrane had not

come out with his ship this time. According to the account of Mr.
Gerard, the new master of the “Merry Maid,” Mr. Cochrane had had a
legacy of a thousand pounds left him lately, and he had resolved to
take a holiday for the space of a voyage. On the return of the ship to
England, he meant to join it, and Captain Gerard would then have to
subside into his former position of chief mate.

That evening, conceiving that nothing was to be done there

towards the object they had at heart, Mr. Fraser and his companion
were arranging their luggage, preparatory to returning to England on
the morrow. Both were downcast—the former particularly so.

“It’s of no use trying to do anything for Harley,” was Mr. Fraser’s

remark. “The way in which we are foiled at every turn is driving me
mad. Surely fate cannot always work so determinedly against people
who are fighting on the side of right and justice.”

“I don’t know. It’s a queerly mixed-up world. But I don’t see any
cause for being so terribly disheartened. We may come across
Cochrane in England without much trouble. And it is just possible
that Stavanger has gone back to England, too. He may think himself
safe there now, and events may develop rapidly in our favour while
there.”

At this juncture, a knock was heard at the door, and a servant

entered the room with a note on a salver. The note was brief, but
puzzling.

“The present captain of the ‘Merry Maid’ would like an interview

with the Rev. Mr. Bootle. He thinks that Mr. Bootle will be greatly
benefited thereby.”

“Show the gentleman in,” was the order given as soon as the note
was read, and a moment afterwards a tall, well-made man entered
the room. He was about thirty years old, originally possessed of fair
hair and a concomitant complexion. Already, however, his hair was of
the sparsest, and of nondescript tint, while exposure to the weather
had invested his face and neck with the ruddiest of hues. As if to
atone for the lack of hair on the top of his head, he was endowed
with a moustache of which nine men out of ten would have envied
him the possession. The extremely punctilious neatness of his attire
would have led many to set him down as foppishly inclined. But one
look at the keen, piercing grey eyes would have negatived the
supposition that he was of a weak nature.

“Pray be seated, Captain Gerard,” said Mr. Bootle. “You have

business with us, I believe.”

“Well, I think so. To begin with, you don’t seem to be friendly

towards Captain Cochrane.”

“One isn’t usually good chums with the people one wants to
arrest.”

“Precisely so. Now, I am not particularly anxious, either to do

Cochrane an ill turn, or to do you a good turn without sufficient
reason. A short explanation of my position will show you that I have
a strong personal motive in seeking your further acquaintance. I
have been ten years in the employment of the owners of the ‘Merry
Maid,’ and when two years ago I passed my final exam., and got a
master’s ticket, I was promised the first vacancy as captain that
offered in the company. Soon after this the former skipper of the
‘Merry Maid’ died, and I expected to be appointed to her, but was
disgusted to find myself passed over in favour of a cousin of one of
the owners—Cochrane, forsooth. Now, he is a man with not half my
experience, and is popular with nobody that has to sail with him; so
you may readily believe that I have not found it easy to swallow
humble pie as his subordinate. At present he is taking a holiday. He
says that he has had a legacy left him. You boarded the ship this
morning with a warrant to arrest him on a charge of being
concerned in a diamond robbery. I have put two and two together,
and have come to the conclusion that the legacy is a hoax invented
to cover his possession of money he could not otherwise give a good
account of. If your suspicions, and my suspicions, I may add, are
proved correct, Captain Cochrane won’t tread the ‘Merry Maid’s’ deck
again. Failing his return, I am sure to be given permanent command,
and as I consider myself to have a right to the position, I shall be
very glad to give any information I can that will remove my rival
from my path. I have, you see, been perfectly straightforward and
honest with you. I don’t pretend to disinterested motives, or any rot
about only being anxious to serve the ends of justice. I want
Cochrane out of my way, and for that reason alone I am ready to co-
operate with you against him. If you care to give me your
confidence, we may be able to help each other.”

Both his hearers had listened eagerly to what Captain Gerard had
to say. Then they nodded to each other, after mutually questioning
the advisability of trusting this stranger, who might, after all, be a
friend of Captain Cochrane, and might have come to pump them in
order to put the villain on his guard. But, somehow, they were both
inclined to believe what had just been told them, and renewed hope
coursed through their veins at the prospect of making important
discoveries after all.

“I believe what you say,” remarked the Rev. Mr. Bootle, after a
short pause; “and after you have heard all there is to say on our
side, you will, I am sure, be even more ready than at present to help
us.”

Then followed a recapitulation of all the details already familiar to

the reader, and it was as Mr. Bootle had surmised. Captain Gerard
became greatly excited, and vowed that he would do all he could in
the cause of justice, even if it became imperative to work openly,
and thus lose the favour of his employers, who were Cochrane’s
relations.

“And you say that Riddell’s brother sailed as steward in the ‘Merry
Maid’ last voyage? Depend upon it, he must have betrayed his
identity in some way or other. And I will tell you why I think so.
There has been some whispering aboard the ship about the late
steward’s disappearance. If this steward was the man you say, his
disappearance is no longer mysterious. He was murdered. And,
what’s more, I will try to prove it.”
 CHAPTER XII.

BAITING THE TRAP.

“You would like to know my reasons for believing that your friend
has met with foul play,” said Captain Gerard, after the first horror
and surprise of his hearers was over. “Well, here they are. It was
only yesterday that our second mate, who is new to the ship, related
a conversation he had had with the bo’sun. The latter asserts that on
the night that saw the last of the man supposed to be William Trace,
it was so unbearably stuffy down below that he coiled himself up
beside the winch, between the third and after hatch, and went to
sleep there. He says that it must have been approaching morning,
when he suddenly awoke with a sensation of danger, such as we all
experience at times when our sleep is disturbed. With his senses all
on the alert, he looked about him, without at first noting anything.
Then it struck him that the sound he had heard was a splash, and a
moment after he saw Messrs. Cochrane and Torrens creeping
stealthily towards the companion, down which they vanished.
Shortly afterwards he fell asleep again, and did not connect the
steward’s disappearance with the splash he had heard, or with the
skipper’s stealthy movements, until he heard different members of
the crew whispering their suspicions of foul play. Had the weather
been bad, or had the steward been an unsteady man, it might have
been supposed that he had fallen overboard while drunk, as the ship
was not rolling. But the man was as steady as the weather was fine,
and he could not have fallen overboard without deliberately trying to
do so. The inference, therefore, is in favour of his having been
pitched over. You may not think this much proof of my belief that he
was murdered. But our Chippy stumbled upon a motive, or what
would have struck a keen observer as a good equivalent for one. He
was ordered by the captain to repair sundry holes which had been
made in the wainscoting by the steward. Since I know who the
steward was, I am sure these holes had been made for purposes of
espionage; that he discovered collusion between Cochrane and the
passenger; that they, in their turn, discovered who he was, and
deliberately negatived his evidence against them by murdering him.
There are also many other corroborative little incidents to be
unearthed, I am sure, and I promise you that by the time the ‘Merry
Maid’ has finished this voyage, there will have been gathered by me
all the information possible concerning this suspected murder.
Meanwhile, your best course will be to return to England, and try to
secure Cochrane. He lives in Disraeli Road, Forest Gate, London.
Before we separate I will give you his complete address.”

“Is he married?”

“He has been, but his wife is dead. Since her death he has placed
his son under the care of a sister, and he makes her house his home
also when in port. Only secure him, and you will learn enough to
liberate your friend from gaol. Cochrane will tell all he can about
Stavanger to screen himself. He is notoriously of a sneakish
disposition. If money is no object, I would suggest that you cable to
somebody in England to see that the fellow does not give you the
slip. And now I guess I had better be moving, as soon as you have
given me an address that will always find you. We are going on to
Bombay from here. Should I come across Stavanger, you may bet
your bottom dollar that I will ensure his arrest.”

A few weeks after the above conversation, an elderly gentleman in

clerical garb was having a somewhat heated discussion with a
private detective.

“How in the world could you bungle so seriously as to let the man
slip through your fingers? I telegraphed the importance of his
capture to you, warning you always to keep him in sight. And yet I
find, on arriving here myself, that you have lost all trace of him.”
 So said the irate clergyman, to whom the detective replied—

“My dear sir, when you have lived a little longer, you will perhaps
have a better understanding of the difficulties of my profession. The
man whom I did watch tallied exactly with the description of the
man I was instructed to watch, and it is not my fault that it turns out
to be the brother-in-law whom I have shadowed. I do not believe
Cochrane has been near the house.”

“Perhaps you are right. But my vexation is none the less, for,
somehow, every effort I have made, so far, has resulted in nothing
but disappointment.”

“Well, it’s a long lane that never has a turning, and Cochrane is
evidently dubious as to his safety and has chosen to obliterate
himself for a while. We may take it for granted that he won’t join the
‘Merry Maid’ again. Nor will the share of the stolen diamonds which
he was seen with at Valetta be enough to support him permanently.
I should imagine he will change his name and set up in some other
line of business in London or its vicinity. If you care to empower me
to do so, I will employ one of my men to investigate, and report the
appearance of the proprietors of new enterprises, preferably those of
a quiet, shady nature.”

“London is such a big place, that we are as likely to stumble

across our man in the street, as to discover him in the way you
suggest. But I suppose it will be as well to be watchful.”

It was only too true. Once more, when apparently on the eve of
success, our friends had been most bitterly disappointed by the
discovery that their quarry had escaped them. For a week his whilom
home was carefully watched, but he did not put in an appearance
there, and, after awhile, it was discovered that his relatives were
greatly distressed about him, as he had neither visited them nor
acquainted them with his place of abode for some time past.
 All things considered, Harley’s prospects of release seemed no
better than they were at the time of his conviction. But it was at
least a little satisfactory to learn that his health had so far not
suffered quite so much as had been feared. His mother, too, bore up
wonderfully under all her trials, and expressed her firm faith in the
ultimate restoration of her son’s liberty and reputation. Hilton’s fate
had been a great blow to her at first. Then, much to the surprise of
friends, she declined to believe that he was really dead, in spite of
the evidence that was forthcoming to that effect.

“Depend upon it,” she said, “God wouldn’t be so cruel as to

deprive me of both my boys. I shall yet see them happy and well.”

After a time nobody tried to argue her out of this belief, for it
comforted her, and kept her from sinking into the despondency that
would otherwise have overwhelmed her. Miss Margaret Cory was, as
usual, a comfort and a consolation to everybody. Mr. Cory was glad
to be at home again, but was as determined as ever to pursue his
investigations further. Annie—quiet, subdued, and sad—was yet
unremittent in her efforts to gain information likely to be useful. As
time wore on, she became more brave, nay, positively daring, and
showed such skill in safely following up clues that her father no
longer felt any uneasiness about her, even though her absences
from home were often unexpectedly lengthened.

The family had removed to a new house in a neighbourhood to

which they were strange, and none but themselves knew that she
was a daughter of the house, since, for prudential reasons, she had
retained her masculine clothing, without which it would not have
been so easy for her to penetrate unobserved into all sorts of places.
Of course the case had been put into the hands of an official
detective, who, however, was as much at a standstill as they were.

One day Annie, whom the servants and neighbours supposed to

be Mr. Edgar Bootle, son of the Rev. Alexander Bootle, found among
the letters on the breakfast table one bearing the Bombay postmark.
She concluded at once that it was from Captain Gerard, as he had
promised to write on his arrival at Bombay.

“Look here, father,” she said eagerly, as the “Rev. Mr. Bootle”
entered the breakfast room, “here is Captain Gerard’s letter. Open it
at once and see what he says.”

The request was promptly obeyed, and what was in the letter is
here transcribed:—

“SS. ‘Merry Maid,’ Bombay.

“Dear Sir,—As per promise, I am losing no time in affording you

such information as is in my power. I find that the look-out man who
was on duty on the night, and at the time of Mr. Hilton Riddell’s
disappearance, is also convinced that he heard a suspicious splash,
but it is doubtful if either he or the carpenter would care to appear
as witnesses in the event of a new trial, since they are afraid of
being detained, without recompense sufficient, long enough to cause
them to lose their ship. Perhaps, however, you may be able to make
them an offer good enough to overcome hesitation in this direction.
But I have, nevertheless, some very valuable information for you.
Yesterday, having only been in port an hour or two, and having
finished all business for the day, I was having a turn on the Apollo
Bunda, when whom should I meet face to face but our late
passenger. He recognised me at once as the former mate of the
‘Merry Maid,’ but would have passed by without apparent recognition
if I had not buttonholed him, and made this course impossible. He
acknowledged my salutation very stiffly, and would still have passed
on had I not remarked, ‘Look here, old man, it’s lucky for you we
have met; otherwise you would most certainly be in gaol to-morrow.’

“You should have seen his face. It went as white as a scared

man’s face ever can, and for a moment he looked as if he was going
into a fit. Then he pulled himself together, and tried to make light of
his emotion.
 “‘What a queer way you have of talking, Mr. Gerard,’ he said, and I
was viciously glad to see what a feeble show he made of the self-
possession he tried to muster. ‘How on earth could I be entitled to
lodgings in gaol?’

“‘Well, thereby hangs a tale,’ I said. ‘Suppose you come down with
me to a quiet house I know of, where we can talk unobserved. You
have some deadly enemies in Bombay at this minute, and the
sooner you take yourself away from a public place like this the
better.’

“Fifteen minutes later we were sitting, each armed with a whisky

and soda, in the public room of a house which I, in common with
other sea-faring officers, had often frequented during my numerous
voyages to Bombay. Stavanger was desperately nervous, and was
careful to sit with his back to the general company, while I, having a
good view of all who came in, was able to assure him that, so far,
none of his enemies were present. And then I exercised a stroke of
diplomacy, for which I am sure you will commend me.

“I have induced him to set off for England, where you will have no
difficulty of capturing him. I set a trap for him, and he has walked
into it beautifully. Briefly, this is what I did. I told him that at Port
Said a middle-aged gentleman and his daughter, accompanied by an
officer of the law, came on board the ‘Merry Maid’ with a warrant for
the arrest of one Hugh Stavanger, alias Paul Torrens, on a charge of
being the principal person implicated in a diamond robbery that had
taken place some time ago at Hatton Garden. ‘The young lady,’ I
continued, ‘was engaged to be married to a man who has been
convicted of the crime, and she has vowed to unearth you and haul
you up, if she has to follow you all over the world. She has tracked
you from one place to another, and is quite confident of catching you
some time. I suggested that you were probably in England again.
But neither she nor her father thought this possible.’ ‘Depend upon
it,’ Miss Cory said, ‘the scoundrel will never dare come to England
again, and it would be folly to look for him there. If he had felt safe
there, he would not have come away, that is true.’ I told Stavanger
much more than this, all tending to make him believe that, after all,
England was the only safe place for him. I enlarged on the wealth at
your disposal, and said that you had several detectives trying to find
him somewhere abroad. Also that you had found out somehow that
he had sailed for Bombay, that you had immediately decided to
follow him in one of the mail boats, and that you must have reached
Bombay a few days before the ‘Merry Maid’ arrived. I also professed
to have no sympathy with you, and remarked that if I could lay my
hands on a few diamonds I would only be too glad of the chance.
The fellow did not condescend to chum with me at all when I was
only a mate. Now he seems to repent his error of judgment; is
convinced that I am quite in harmony and sympathy with him; and is
ready to swallow any advice that I may offer. Here is the result of
my advice and manœuvring. He went back to his hotel with his hat
over his eyes, and his light coat huddled about his neck as much as
possible, I being kind enough to accompany him. Then he put a few
things into his pockets, packed a portmanteau, paid his hotel bill,
and went with me to the skipper of a boat leaving for England that
tide. He is now a passenger in that boat, which is called the ‘Hornby
Cross,’ and is due in London a month from date. Before parting from
him, I, partially by wheedling, partially by insistence, got a diamond
ring out of him. This ring I will bring home with me, and, should it
prove to be a part of the stolen property, you will have proof enough
to saddle the robbery on Stavanger, even if he were not walking
right into your clutches. This letter will reach you a week before the
‘Hornby Cross’ is due, and will give you time to make the necessary
arrangements for capture. The ‘Hornby Cross’ is owned by Messrs.
Ward, Willow, and Co., Fenchurch Street, and Stavanger’s present
alias is John Morton. A word or two more. The scoundrel had half a
notion for a few minutes of remaining here, on the chance of being
able to ‘stop your gallop,’ as he called it. In other words, if he can
ever get half a chance he will murder you, as he considers that if the
world were rid of Miss Cory and her father he would be perfectly
safe. I persuaded him that it would be foolish for him to linger here,
and vowed that I could find a safe method of disposing of you. I am
actually to have a hundred pounds as soon as I can prove
Stavanger’s enemies to be no longer in the land of the living. Nice
for you, isn’t it? But there is no fear of my ever earning that hundred
pounds, nor of him ever employing anyone else to earn it, since he
is sure to be in your power soon.”
 CHAPTER XIII.

MORE DISAPPOINTMENTS.

The “Hornby Cross,” having accomplished its voyage in safety, was

viewed with considerable interest as it was being manœuvred into
Millwall Dock, whither it had brought a cargo of grain from India.
Among the onlookers were a few whose attention was the result of
curiosity alone; but the greater part of the small crowd assembled at
the dock gates had business of some sort on board. There were
relatives and friends of the returning seafarers, eagerly looking out
for their own folk, and anxious to see them again after their long
voyage. And there were numbers of touters for nearly every trade
that can be patronised by seafarers. There was also Mr. Gay, a
detective whom we have met before, talking to an elderly clergyman
and a slim young man, whose clear blue eyes keenly watched the
operations on board the incoming vessel.

Presently she was near enough to be boarded by the most

venturous spirits in the crowd, and these were soon clambering
about in what seemed a very reckless fashion to those unused to the
sight. Among the first to touch the “Hornby Cross’s” deck was Mr.
Gay, and he at once made for the captain, who was standing on the
bridge, contentedly watching the operations of the dock pilot, into
whose charge the vessel had been put.

“Good morning, sir,” said Mr. Gay, touching his hat in greeting. “I
am glad to see you safe in port. My name is Gay. You will have
received the note I sent you by the pilot this morning.”

“Your name is Gay, is it? Well, I guess you won’t feel like your
name for a bit. Your note came too late, sir.”
 “The deuce! Do you mean to say that Morton, as he calls himself,
has given us the slip?”

“I do. You see, I would have done my best to help you if I had
had only half a notion who my passenger was. As I hadn’t, you can’t
be surprised at being done.”

“But the man really started from Bombay with you?”

“Yes, he really did. But he didn’t choose to come all the way with
us, and I had no reason for supposing that he was wanted here. We
had to call at Gibraltar for bunker coals, and Mr. Morton expressed a
fancy to remain behind and explore Spain. I reckon he had funked
about coming to England, and thought the Spaniards would be
better chums with a rogue.”

“My clients will be dreadfully disappointed. Everything seems to go

against them.”

“It seems to me that in this case it is your own stupidity that has
gone against them. You must excuse the remark, but it expresses
what I think.”

“And in what way have I been stupid, may I ask?”

“Well, you might have found out where we were likely to bunker.
The owners would have given you the information. Then you could
have come out to intercept your man before he had a chance to
clear, instead of waiting here expecting him to walk into the trap set
for him. Or you could have cabled to me to detain him. But, of
course, these little items are things a detective wouldn’t be likely to
think of.”

“I feel quite grateful for your sympathy in my disappointment,

Captain Criddle, but feel it necessary to correct you in a few
particulars. Even though only a detective, I was struck with the idea
that it would be wise to consult the owners. Their information left
only the course adopted open to me. I was told that you had
probably already taken in bunker coals at Malta, and that you would
not be calling at any other place before your arrival in England. It is
only six days since we learned that Morton, or, more correctly
speaking, Stavanger, was on board your ship, and either meeting
him, or cabling to have him detained was out of the question. You
received instructions through the pilot at Gravesend, and I fail to see
what further steps could have been taken for the man’s capture,
unless we had been more accurately informed of your proceedings
by your owners.”

“Oh, well, it isn’t their fault, as they knew no different. But I

haven’t time to talk any more, as I have a swarm of people to see.
Good afternoon.”

Thus peremptorily dismissed, Mr. Gay found it necessary to return

to shore without the prize he had hoped to land with him, and his
professional chagrin was mingled with real sorrow for the bitter
disappointment of his clients. He was not a little angry with Captain
Criddle for his want of sympathy and his unflattering insinuations.
These were, no doubt, prompted by the reluctance felt by most
people to have anything to do with a criminal case in any shape or
form, and Detective Gay was not far wrong when he suspected
Captain Criddle of being rather pleased than otherwise that the
expected arrest had not taken place on board his ship.

That the Corys were deeply dismayed is a foregone conclusion,

and that Mr. Cory thought it useless to make further investigations
for a while is not surprising.

“The man won’t have stayed in Gibraltar, that is certain,” he said.

“And if we were to go there, and follow up the trail, it is doubtful if
we could ever track him and secure his return to England. So long as
he chooses to remain in Spain, so long is he safe. Even if he leaves
there I’m afraid his pursuit would be but a wild goose chase. His
predilection for aliases will make identification difficult, and he seems
to possess some abnormal instinct that cautions him against coming
danger.”

“I think myself, sir,” observed Mr. Gay, “that he won’t come back to
England, at all events, until he has run through his plunder. Even
then he may be quietly supplied with money by his father, whom we
believe to to be in league with him. If I were you I would not move
in the matter for a while, in order to lull all suspicion of pursuit. If
we can stumble on Captain Cochrane in the meantime, so much the
better. We may be able to prove Mr. Riddell’s innocence through
him.”

“And if we do not stumble on Captain Cochrane?” inquired Annie,

whose assumption of masculine garb made it more imperative upon
her to keep her composure than would have been the case had she
been figuring simply as Annie Cory.

“In that case it will be difficult to bring conviction to the minds of

judge and jury, if you decide to move for a fresh inquiry.”

“But the ring which the present captain of the ‘Merry Maid’ is
bringing home with him?”

“That may prove valuable evidence, or it may not, just as it

happens.”

“It is bound to be valuable evidence when it is identified as part of

the stolen property, as it is sure to be.”

“By whom?”

“By whom? Why, by the Stavanger Bros., or by Mr. Riddell, who

inventoried the goods the night they disappeared.”

“Well, I don’t want to dishearten you too much; but I feel it my

duty to show you how difficult the case really is. No doubt Mr. Riddell
could recognise this diamond ring. But would his word be accepted?
He was convicted of the robbery by overwhelming evidence, which it
is now to his interest to negative by every means in his power. It is,
therefore, natural that he should try to remove the onus of guilt
from his own shoulders to that of another, by swearing to property
traced to that other’s possession. Pray, don’t be angry! I am not
stating a private conviction that Mr. Riddell would swear falsely, but
that a chuckle-headed judge or jury would be likely to think so.
When a man is once down, the world likes to keep him down.”

“But,” put in Mr. Cory, “there are the Brothers Stavanger, who
would know the ring as well as Mr. Riddell, presumably better.”

“And how are we to guarantee that they will aid the ends of
justice by identifying that which will help to prove the son of the one
and the nephew of the other to be a thief, a perjurer, and an
absconding vagabond? The reputation of both the firm and the
family depends upon Hugh Stavanger’s safety. I firmly believe that
they have already done some false swearing in the matter. Is it likely
that they will reverse their former tactics and play into our hands
now?”

“I’m afraid you are right. Still, we have several things to fall back
upon that will help us, even if the evidence of the ring proves
valueless.”

“It cannot prove valueless,” said Annie now, with considerable

decision. “Captain Gerard will relate how he became possessed of it,
and there is his letter to us by way of corroboration of his evidence.
The Maltese jeweller will also help us, if necessary. So, even if we
cannot bring the real culprits up for judgment, we can move for a
new trial, and even if judge and jurors are as addlepated and
obstinate as you would have us to believe, they must see that the
case is much deeper and more complicated than they supposed. And
if it is their natural propensity to doubt the word of people accused
of crime, they will be as likely to exercise it upon the man now
accused. Mr. Peary, our solicitor, must push things on without delay,
and we will rely upon such evidence as we can produce, if we can
secure a new trial. Meanwhile, there is still time to do some active
work, and a plan I have in my head may result in the discovery of a
clue to Hugh Stavanger’s whereabouts.”

What that plan was Annie would not disclose, though pressed
upon the point both by her father and the detective. The latter was
very much annoyed at the turn events had taken, and was by no
means sanguine as to the ultimate results of the investigations that
were being pursued on Harley Riddell’s behalf. But he went away
with a higher admiration of Annie Cory’s pluck than he had ever felt
for that of any woman in his life.

“She is game to the core,” he thought, “and if anybody can help

the poor fellow in gaol, it is his sweetheart, who, it seems to me,
cannot be daunted. She is one in a million. Most girls would have sat
down and fretted, instead of trying to remedy the evil. Well, good
luck to her, say I. If a girl like that doesn’t deserve to succeed,
nobody does.”

From which remarks it may be gathered that Mr. Gay was not one
of those who, to cover their discomfiture, would begrudge success to
another, because he or she did not happen to be in the profession.

A few weeks later the “Merry Maid” was safely docked again, and
Annie, accompanied by her father, and still figuring as Mr. Ernest
Fraser, was sitting in the cabin of the steamer talking to Captain
Gerard. They had awaited his arrival at the dock, being too impatient
to stay at home until he had time to visit them.

His face lengthened considerably as he listened to the long

account of disappointment and failure they had to give him.

“Well, I’m hanged if ever I knew anything like it,” he said at last,
in a tone of great vexation. “I thought everything was plain sailing,
and never dreamt that Stavanger would alter his mind about coming
on to England. You can’t touch him in Spain, and for anything we
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