Billionaire Wilbur L. Ross, Jr. made his money investing in distressed assets and has filled his West Palm Beach home with his pieces from his $150-million art collection.Melissa Lyttle
Wilbur Ross is chairman and chief strategy officer for New York-based WL Ross & Co., an affiliate of Invesco. The 78-year-old contrarian has made a fortune betting on troubled banks and distressed assets in industries such as steel, coal and textiles.
Where are the opportunities now?
We have purchased quite a few distressed bonds of exploration and production companies in the oil patch, mainly in the U.S. shale industry. Near term, we do not see a major upward movement in the price of oil, but by 2017 or later, the price may stabilize closer to $60 (U.S.) a barrel. We have put about $1-billion to work in marine transport—mostly crude oil and petroleum tankers—including stakes in Diamond S Shipping Group and Navigator Holdings. We have also made a small commitment to the building materials sector. The theory is that home and apartment buildings are very much on the rise, and sooner or later the United States and other countries have to deal with the need for more infrastructure. We are now looking at the base metals and mining space, including Canadian companies. My guess is the commodity sector will hit bottom in 2016.
What is your outlook for China?
We don't think the economy is going to grow at anything like 7%, which is a very aggressive target—more like 4% to 5% next year. The mix of the economy is changing. It used to be driven by capital investment. Now, it is being driven by growth in service industries, and those industries don't use a lot of raw materials. That is why you have the slump in commodities. It is, however, a big market with rapidly growing income. Chinese products, transportation and gaming companies would be good places to invest. So far, we have not been much of an investor in open-market securities in China. Our two main activities have been running a clean-energy fund with China's largest electric utility, and investments in 17 factories.
What do you consider to be your best investment?
I created my business within Rothschild in 1997 and then bought it from them on April 1, 2000. For someone becoming an entrepreneur, I thought maybe April Fool's Day would be a good start. It has turned out to be the best rate of return I have ever had.
What about your worst investment?
Anybody who invests in risky things is bound to make mistakes, but it's a fairly small percentage. We try to make returns on the order of 20% a year, so you can't afford too many.
What advice would you give investors today?
Find companies you believe in and think are attractive. Then, put in buy orders at 5% or 10% below market. We are in a very volatile period, so you may get lucky.
You're an avid art collector. Does your approach to art differ from investing?
You buy a painting or a sculpture because you love it, and want to own and cherish it. I don't view art as something in which we are speculating. Art is very illiquid and volatile, particularly the contemporary side. Our main collection is surrealism, and particularly René Magritte, a Belgian surrealist. If you deal a lot with distressed companies, surrealism is a natural thing for you to collect, because distressed companies are in their own surrealistic world. There is usually something a little bit strange, a little bit skewed or out of order. It is art that is both visually attractive and intellectually engaging.
Do you have any investing mentors?
That would be Benjamin Graham and David Dodd, who wrote Security Analysis. They laid the foundation for value investing—that is, buying stocks that are fundamentally cheap and taking a long-term view.