Lessons From a Late Great Billionaire Investor

vegas-babyBillionaire investing legend Kirk Kerkorian died Monday. He was 98 years old.
Few of us are surprised when a 98-year-old dies. I was when I crossed Kerkorian’s obituary this week.
Kerkorian was no husk of a man who merely survived his advanced years. Kerkorian remained trimmed, tanned and athletic to the end. He retained an élan and a sartorial splendor someone 50 years his junior would envy. If you’ve ever fantasized about living centuries and how you would age, Kerkorian would fit your fantasy.
Kerkorian also retained his billionaire investor status to the end. Though not in the league of Warren Buffett or Carl Icahn, Kerkorian nevertheless left this world $4 billion richer than when he entered it. Not bad for an eighth-grade dropout and son of poor Armenian immigrants.
Like any success story, Kerkorian did it his way. But other investors can learn from Kerkorian to do it better their way. Below I’ve listed a few useful Kerkorian takeaways.

Ignore Remorse and Regret

We’ve all done things we wish we hadn’t done. On the other side of the ledger, we’ve all neglected to do things we wish we would have done. That’s life, so learn and get on with it. That was Kerkorian’s attitude.
Kerkorian was the first to venture into Las Vegas to build the now-ubiquitous mega-hotel. His massive 3,000-room International Hotel (now the Westgate Las Vegas Resort & Casino) opened in 1969. As timing would have it, the 1969-1970 recession caught Kerkorian overextended. His International Leisure stock, which owned the International and Flamingo hotels, was worth $180 million at the beginning of 1970. A year later, he was forced to sell half his holdings for $16.5 million.
Time to brood? Not at all. Kerkorian got back in the game and built a new mega-hotel, the original MGM Grand (now Bally’s). And he continued to build and to buy.
By the early 2000s, Kerkorian owned the new MGM Grand, the Bellagio, the Mirage, Treasure Island, Monte Carlo, and a host of other Vegas hotels. At one point, Kerkorian-owned properties accounted for over half the rooms on the Strip.
The moral is that everyone will own investments that go south, but that doesn’t mean you stop investing. Better to live and learn and to keep going. Quitting ensures failure and leads to a dull existence.

Hone Your Instincts and Follow Them

Investing is more than numbers. Seemingly arbitrary information matters.
The Wall Street Journal reports that after seeing that the grounds outside of customer view at the Bellagio were as meticulously maintained as those within view, Kerkorian deduced that the Bellagio was as well-run as the company which developed it. He acted on his hunch and successfully forced rival casino mogul Steve Wynn to sell him Mirage Resorts, which owned the Bellagio.
The lesson is pay attention to information others are ignoring and determine if it matters.

Practice Concentrated Contrarianism

Kerkorian frequently concentrated his investments. Las Vegas is an obvious example. Owning a bunch of hotels in one location is certainly an example of concentrated investing.
Kerkorian similarly concentrated his stock investments.
In 1990, he bought 9.8% of Chrysler Corp.’s outstanding stock. At the time, both the U.S. economy and Chrysler’s shares were languishing. A few years later, he upped his stake to 10.2%. In 1998, Daimler-Benz, the parent of Mercedes-Benz, acquired Chrysler in a $36 billion merger. Kerkorian made $5 billion on the takeover, more than triple his Chrysler investment.
Embrace concentration, because a diversified stock portfolio rarely produces munificent windfalls.

Learn to Double Dip the Cycles

If it worked once, don’t hesitate to try it twice. Markets move in cycles.
In 2005, Kerkorian attempted to recreate his Chrysler success. He bought a 9.9% stake in General Motors. Like with Chrysler, Kerkorian wanted to force change. He proposed that GM sell money-losing brands and form an alliance with Nissan and Renault. GM ignored its overtures. Kerkorian sold his GM stake the following year for a small profit. (GM would subsequently declare bankruptcy and reorganize. The reorganization included, ironically, jettisoning money-losing Pontiac and Saturn brands.)
Undeterred, Kerkorian tried once again. In 2008, he acquired a 6.5% stake in Ford Motor Co. (NYSE: F), only to sell it within a few months after Ford’s stock plummeted. This time around, Kerkorian suffered an investment loss. He’d bought at $8, but sold at $2. C’est la vie.
Was Kerkorian simply stubborn? Not at all. Precedent suggested double dipping works, because it had worked. Kerkorian had bought and sold MGM three times previously, earning a hefty profit each go around.
In 1986, Kerkorian sold MGM to cable magnate Ted Turner for $1.5 billion. A year later, Turner, reeling under a crushing debt load, sold all but MGM’s film library back to Mr. Kerkorian for $300 million. In 1990, Kerkorian again sold his MGM assets to Italian financier Giancarlo Parretti for $1.3 billion.
In 1996, Kerkorian bought MGM from Credit Lyonnais, which had seized the MGM assets from Parretti, for $1.3 billion. Ten years later, he sold MGM to a Sony-led consortium for $5 billion.
No strategy works every time.  But if you have a sound strategy, it will work often enough.

Stay Engaged Until the End

Staying engaged applies to life in general. Everyone needs something to look forward to. Investing provides that “something” (which I explain here).
Kerkorian was engaged until the end. Indeed, before he died Kerkorian was poking around Hollywood for a new acquisition. Investing gives you a reason to hang around for another day. You want to see how it all works out.
A myriad of variables must coalesce to produce a 98-year-old billionaire. Few of us will live to be 98; fewer still will be billionaires. But if you want to accumulate wealth and live deep into your Buick-driving years, you could do a lot worse than to follow Kirk Kerkorian’s lead.

Worry-free riches

They’re owned by some of the wealthiest people on the planet. They share a few key similarities that distinguish them from 99% of equities. Even as the S&P keeps breaking record highs, they’re still crushing it. In fact, over the last ten years they’ve outpaced it by a colossal 390%. Find out more right here.

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