Fundamental advice, phenomenal success -- Dan Dorfman, 2 August 1991,``Ah, but a man's reach should exceed his grasp, or what's a heaven for?'' - Robert Browning
When he was in his teens, Robert Wilson dreamed of being a top Wall Street lawyer, maybe even managing partner of high-profile law firm Sullivan & Cromwell. Years later he dreamed of being a billionaire.
Alas, he never achieved either goal. But he didn't do badly, amassing a fortune as he turned a $15,000 portfolio of stocks he got from his mom into a net worth of $190 million.
To do that, of course, you got to be a fella with strong opinions. Wilson, now 64, surely has those:
- ``If you believe a company's earnings forecast, you're out of your mind. It's about as reliable as President Bush's pledge of no new taxes. Managements lie like politicians. They're not venal lies, but fibs around the edges.''
- ``Most of Corporate America is corrupt and self-indulgent. Look at their skyrocketing salaries, huge bonuses, lavish expense accounts and perks (limos, private jets, hunting lodges) - often taken with no relation to profitability of their companies. The salary spread between top management and hourly workers is outrageous.''
- ``If a brokerage labels a stock a hold, sell it fast. A hold is a euphemism for sell, which many brokerages won't say for fear of jeopardizing company relationships.''
Wilson, highly opinionated and often caustic, also has bum thoughts about the stock market. It's in for rough sledding, he says. Why? He sees higher taxes at federal, state and local levels reducing consumer demand, spurring higher inflation and leading to lower-than-expected corporate earnings.
He's also worried that our rising budget deficit - which he pegs at $350 billion next year - may be unfundable. The Japanese and Germans have funded it in the past, but they no longer have as much money available for us, he says. So if the deficit becomes unfundable, the dollar will go up; likewise interest rates. And the market, he says, will take a beating. ``We've glided through the deficit before, but I'm not sure we'll do it again.''
Born into a ``lower upper-class family,'' Wilson scrapped his original idea of becoming a lawyer when he got a series of C's in law school. He was also no great shakes when he started out as an investor. ``I did poorly,'' he recalls.
So how did he build a fortune, especially when he says: ``I've never had an original thought in my life.''
Through practice and refinement, networking and hedging his bets, he says. That hedging refers to selling short - a bet stocks will fall in price.
``I didn't make my money on long shots,'' he says. ``It was a case of diversifying my portfolio, having a long-term orientation and grinding it out; also selling short, giving myself survival insurance in case of a market crash.''
Wilson, who started a fund to manage his own money in 1968, benefited handsomely from his ability to ferret out brokers with super ideas - both buys and shorts. He also used Mexican and Swiss financing to get more borrowing power in the purchase of stocks - a practice no longer allowed.
His trademark: his uncanny ability on the short side. He had nerves of steel. If stocks went against him, he'd often short more - even in the face of huge losses. Among his top killings: National Video, Bowmar Instruments (both went belly up) and a host of real-estate investment trusts. By the same token, he blew $20 million on a short sale in Resorts International, a New Jersey gaming operator no longer public.
Recollection of the Resorts loss only reinforces Wilson's view of buying and selling stocks. ``If you're not prepared to be constantly humiliated, stay the hell out of the market,'' he says. ``By and large you're going to have egg on your face half the time.''
Some of his investment thoughts:
- More than half the skill of making money is admitting when you're wrong and taking the loss. The typical loser is the guy whose stock is down and says he'll sell it when he gets even.
- The secret to big money is compounding - grinding out consistent gains, not sporadic spectacular results. That's how Warren Buffett did it. There are no short cuts. A $1,000 investment compounded annually at 15%, will be worth $16,370 in 20 years. That's more than 16 times your money. Albert Einstein said it best: The greatest invention of mankind is compound interest.
- If a stock is going down - even more than the market - it's not necessarily a reason to sell. More often than not, it's the best time not to sell, provided, of course, the company is doing as well as you thought.
- Never buy a stock because it's cheap or short a stock because it's expensive. Only buy or short if you perceive something is happening that will alter investor thinking.
Though he gave up his fund five years ago and doled out most of his money to a group of money managers, Wilson's investment mind remains razor sharp. His best ideas: biotech and Texas real estate.
Although many biotech stocks have run up, Wilson says we're still in a biotech revolution - in medicine, waste disposal and industrial processing. ``The right stock will be up 100-fold from here,'' he says. ``It's like picking a Ford or GM back in the 1920s when there were dozens of automakers.''
Texas real estate, Wilson figures, is going to be dynamite. Because of the crash in energy prices and collapse of many Texas banks, you can buy real estate there at half the replacement costs. In the face of this, he says, Texas is one of those rare states cutting back on spending, rather than hiking taxes. It adds up, he says, to ``a golden buying opportunity.''
What would he like to tell me if we meet in three years? ``That I'm still alive,'' he says.
His lifestyle now? ``I'm still succumbing to la dolce vita (sweet life). And I'm still a dirty old man.''
Family: Divorced after 20 years of marriage, son of an insurance salesman.
Residence: A posh nine-room Manhattan West Side apartment overlooking Central Park. He bought it in 1978 for $300,000. It's now worth about $3 million, he says, down from a peak of $5 million.
Education: B.A. in economics, magna cum laude, Amherst College; M.A. in economics, University of Michigan; two years, University of Michigan Law School.
First job: A trainee at First Boston Corp., where he made $200 a month.
Key investment jobs: Securities analyst for 15 years at National Bank of Detroit, General American Investors and A.G. Becker (now part of Merrill Lynch). He ran Robert Wilson Associates from 1968 though 1986. The firm was devoted to the management of his own money. It was a hedge fund - playing longs (stocks owned) and shorts (a bet on lower stock prices). The fund started with assets of about $4 million and terminated with assets of about $200 million when he retired in 1986.
Net worth: $190 million - down from a high of $230 million in 1985. The decline was mainly due to his big short position in the Japanese stock market, which went against him, and a hefty long position in technology stocks, which got creamed. He was a self-made millionaire at age 39 and was worth $100 million when he was 56.
Investments: Most of his net worth is tied up in stocks and managed by some 20 pros, including short sellers. Those doing best include Dick Gilder of New York brokerage Gilder, Gagnon; broker Bob Birch of Oppenheimer & Co.; New York money managers Neil Weisman of Chilmark Capital and Morris Mark of Mark Asset Management. He is also involved in a partnership that invests in distressed Texas real estate.
Style: Witty, biting, opinionated and at times obnoxious. (``You ought to do something about your weight; you're getting fat,'' he tells me. ``Also, get yourself a new pair of glasses; the ones you're wearing look just awful.'')
Charitable endeavors: Chairman of the New York City Opera, to which he has contributed about $3 million. He's also a director of the Lincoln Center for the Performing Arts and a trustee of the Whitney Museum of American Art.
Interests: An intellectual and world traveler, it's not unusual for Wilson to head off to London, Munich or Vienna for some operas. He loves great food and fine wines.
EAR CUTLINE:BOB WILSON: Don't buy firms' earnings forecasts. CUTLINE:WILSON: Likes Texas real estate.
last updated december 2013