How To Invest Like Wilbur Ross
Described as “a vulture, albeit a well-dressed one,” Wilbur Ross is also “one of the best bottom feeders in the business,” according to no less an authority than a fellow billionaire, real estate magnate Leonard Stern.
These comparisons may seem unflattering, but they’re actually high praise. Ross, 75, is chairman of WL Ross & Co., among the largest and most active firms specializing in restructuring financially distressed companies. He has built his career on investing in companies that are trading below book value, something any investor can look for.
“You get paid for taking risk that people think is risky,” Ross has said. “You don’t particularly get paid for taking actual risks.”#-ad_banner-#
Wilbur Ross’ Biography
The son of a judge, Ross grew up in New Jersey and attended a Jesuit military academy in Manhattan. While there, he was captain of the rifle squad, which permanently damaged his hearing. Colleagues say he speaks very little and in a near whisper when he does.
He attended Yale University with the intention of becoming a writer but found his true passion during a summer job at a money management firm in New York. Describing himself as “a bit of a bookworm,” Ross said he enjoyed spending hours at the library researching companies. After earning an MBA from Harvard Business School in 1961, Ross got a job at Wall Street money manager Wood Struthers & Winthrop.
He spent the next 15 years working on the company’s troubled venture capital investments. Although some failed, he got a thorough lesson in dealing with banks, creditors and courts. By 1976 he had parlayed this expertise to a spot leading the worldwide bankruptcy advisory practice at Rothschild, where his team assisted in the restructuring of more than $200 billion in liabilities around the world.
By 2000, Ross had established his own company with $440 million. Now owned by Invesco, WL Ross & Co. has more than $7 billion in assets.
| Ross built his career on investing in companies that are trading below book value, something any investor can look for. |
Wilbur Ross’ Investing Strategy And Big Wins
After forming his own company, Ross picked up numerous steel and mining ventures that had gone bankrupt. He sold his steel holdings for $4.5 billion in 2005 to ArcelorMittal, making $2.5 billion for WL Ross and $300 million for himself.
Ross began investing in the banking sector after the financial crisis, and his firm was part of a group that bought BankUnited (NYSE: BKU) from the Federal Deposit Insurance Corp. He also spent money on troubled banks that needed cash but weren’t bankrupt, such as New Jersey’s Sun Bancorp (Nasdaq: SNBC). At the time, he said he chose them because they were trading at big discounts to their book values. His firm still holds large positions in those companies.
Ross attributes his success to keeping things simple and doing them well. “I think good ideas really are simple ideas,” he has said. “I’d rather back a mediocre idea that was brilliantly executed than a brilliant idea that was poorly executed.” Ross has also said that one must manage not only risk, but one’s own emotions: “To be successful, you have to be able to keep your emotions separate from the decision-making process.”
Wilbur Ross’ Portfolio: What’s He Holding Now?
His current portfolio is still heavily weighted toward financial services (73.7%), followed by energy (21.6%), technology (3.6%), exchange-traded funds (ETFs) (0.9%) and health care (0.2%). However, his recent moves seem to imply a shift away from finance and technology and into health care. He has reduced his holdings in Assured Guaranty (NYSE: AGO) and BankUnited and sold out of Facebook (Nasdaq: FB), Zynga (Nasdaq: ZNGA) and Groupon (Nasdaq: GRPN). His most recent buys include LipoScience (Nasdaq: LPDX) and Select Medical Holdings (NYSE: SEM).
Wilbur Ross’ Top 10 Holdings
(Sources: GuruFocus, Google Finance)
Action to Take –> A lot of Ross’ fundamental strategies make for timeless investing advice: keeping things simple, risks in perspective and emotions in check. However, you can’t invest in distressed companies and not expect some stress along the way. While it doesn’t appear on the list of top public holdings, WL Ross has made large private equity commitments to the international shipping sector. He made a very persuasive argument that while the sector is temporarily distressed, it has long-term potential. An investor wanting to follow Ross’ lead in marine transport might consider the Guggenheim Shipping ETF (NYSE: SEA); a single-stock buy might include the highly rated Kirby Corp. (NYSE: KEX).