I have been reading a book on Prince Walid bin Talal of Saudi Arabia, who some have called the Buffett of Arabia. Here is a 1999 New York Times article that looked at that possibility in depth:
HE calls them his 100 wives and honors each with a flag tacked to his office wall. Citigroup. Saks Fifth Avenue. Four Seasons Hotels. Apple Computer. Movenpick. Saatchi & Saatchi. Daewoo. Donna Karan International. Trans World Airlines. The News Corporation. Planet Hollywood. Hyundai Motor. Teledesic.
It is an extraordinary group, all the more so because this one man, Prince Walid bin Talal of Saudi Arabia, owns at least 5 percent of each of them — the core of a fortune that he says is now worth $14.2 billion.
That represents a tenfold increase from just 10 years ago, the fruit of an investing binge that has won the Prince, now 44, renown as one of the world’s sharpest stock pickers and catapulted him to a place behind only William H. Gates of Microsoft on the Fortune magazine list of the world’s richest business people.
To hear Prince Walid tell it, his secrets have been judgment and fidelity — a knack for buying low and the fortitude to stay with investments through tough times.
”When I invest in a company,” he said, speaking in bursts as he downed Bedouin coffee on the back lawn of his new $200 million palace in Riyadh, ”I get sentimentally attached.”
However, another magazine, The Economist, recently raised questions about both the origins of Prince Walid’s wealth and the extent of his investing prowess. The Prince said the suggestions of shadiness had been hurtful.
”I know that people would like to say that this Saudi prince is like all the others,” he said bitterly — an apparent reference to the royal corruption that business people and diplomats say is endemic in Saudi Arabia.
Still, in a series of interviews, Prince Walid acknowledged that one early source of his investment capital was ”hundreds of millions of dollars” in ”commissions” paid by foreign and Saudi businesses. Even last year, he acknowledged, such commissions accounted for $40 million of his $500 million in income.
The commissions are a form of commercial lubricant common in the Middle East, as elsewhere. A company that wants to win contracts in Saudi Arabia often hires a prince or other prominent Saudi as an agent. While executives complain that they often see very little work in return, they still pay — out of the perception that it is difficult, if not impossible, to win lucrative contracts in Saudi Arabia without a high-level connection.
Prince Walid said the money paid to him, at least, had always been hard-earned. ”This had nothing to do with influence,” he said. In return for what was usually a 30 percent cut on a contract, he explained, his firm provided services that included ”handling all government relations, from A to Z.” Recently, with a steep falloff in the construction sector, a major source of business in Saudi Arabia, his commissions have been ”nothing huge, like before,” the Prince said.
In four recent conversations — beginning at his Riyadh office, continuing a week later at his palace in the capital after a late-afternoon lunch, and carrying over into long-distance talks as he cruised the Caribbean in his yacht — the Prince offered one further revelation about his finances:
For all his professions of faith in buy-and-hold investing, the largest single source of his income is speculative, in-and-out trading in real estate and stocks. Fully a quarter of his income last year was from such trading, he said, through a $2.1 billion account used most often to buy and sell stocks and real estate in Saudi Arabia. About $200 million to $300 million in the account is devoted to short-term trading in American stocks.
”I don’t see any contradiction,” Prince Walid said. ”Frankly speaking, I’m all over the place — very strong in trading and very strong in investment. But my long-term investment portfolio is untouchable.”
CLEARLY stung by The Economist’s rare challenge to his reputation, the Prince volunteered a detailed accounting of his wealth. His current holdings, he said, include about $10.2 billion in long-term investments abroad, $700 million in listed Saudi stocks, $2.1 billion in other assets in the Middle East and Africa and $1.2 billion in cash that has piled up because he is ”uncomfortable” with the current stock market, regarding it as ”definitely overvalued.” (The speculative fund, he said, is made up of portions of the latter three categories.)
His start as an investor was buying and selling Saudi real estate, not buying and holding stocks. In 1979, when he was 24, the Prince said, he mortgaged a house given to him by his father to come up with $400,000 in capital.
In the 1980′s, he said, real estate investing accounted for 65 percent of his income, with an additional 10 to 15 percent coming from commissions. By 1989, his net worth had grown to $1.4 billion.
Though it was not until late 1990 that the Prince turned to stock investing outside Saudi Arabia, with a dramatic bailout of Citicorp, some $9.2 billion of his wealth today is in publicly traded stocks. Indeed, it is his success in finding undervalued public companies, and his gutsiness in betting on them with vast amounts of cash, that have earned the Prince a reputation as the Warren E. Buffett of Arabia.
Some of his long-term investments, in companies like Netscape Communications and Apple Computer, have indeed produced breathtaking gains. An analysis by his advisers at Citibank of his holdings in publicly traded companies since 1991 found an average annual internal rate of return — a complex figure that accounts for cash flows as well as appreciation — of 35 percent.
”Throw in other investments, and that figure rises by another eight percentage points,” Prince Walid said in a letter to The Economist. (The Prince said he had been told recently, for example, that his initial investment of $80 million in Canary Wharf, the London real estate project that has lately turned from a debacle into a triumph, would soon be returned to him in cash, still leaving him with a roughly $4.3 billion stake.)
Even so, stripping away his single best investment, Citicorp, in which the Prince put nearly half his money in 1990 and 1991, the returns on his stock portfolio have been much less impressive.
Since 1992, he has invested some $1.9 billion in other publicly traded stocks — including big gainers like the News Corporation but also big losers like Euro Disney. At the close of trading on Thursday, those stocks were valued at $2.9 billion, including his holdings in Canary Wharf Group, which made its initial public offering that day. The gain translates to an average annual return of 7.3 percent, far below that of the major market indexes.
The Prince says any calculation that excludes his Citi holdings is unfair, because he has made a conscious decision to keep the financial services company — called Citigroup since Citicorp merged last year with the Travelers Group — as more than 65 percent of his stock portfolio.
In any event, thanks to Citigroup and other good investments, the overall surge in the Prince’s fortune has been phenomenal, and he bridled at The Economist’s characterization of his record.
”True, my performance might not be quite as good as Warren Buffett’s, as you note — nobody’s perfect,” he wrote in his letter to the magazine, which was published in The Economist’s March 20 issue. ”You may find this ‘disappointing,’ but I can assure you that quite a few of your readers would be more than content with consistent returns like this.”
(Shares in Mr. Buffett’s investment vehicle, Berkshire Hathaway, have gained an average of 29.4 percent annually since 1992, a figure not readily comparable to the internal rate of return that the Prince’s bankers provided to Money & Business at his request.)
Regardless of how much his wealth might have been built on what critics regard as feudal tributes, the Prince is seen by most Saudis as an exception in a country whose royal family is sometimes accused of greed and sloth. And within the royal family, he is regarded as an outsider.
His father, Prince Talal bin Abdel Aziz, a son of Saudi Arabia’s founder, King Abdel Aziz ibn Saud, was a leader in the early 1960′s of a group known as the Liberal Princes, who openly differed with King Faisal, then the country’s leader. Prince Walid spent part of his childhood in Lebanon with his maternal grandfather, Riad al-Solh, modern Lebanon’s first Prime Minister. Now, like every other grandson of King Saud — they number in the several hundreds — the Prince receives a monthly royal stipend of $15,000.
The Prince is hard-working, even driven. In accordance with Muslim teachings, he does not drink, smoke or gamble. He also does not invest in tobacco or alcohol stocks; he has extensive holdings in hotels but insists that the portion of his income generated from drinking, smoking or gambling in those establishments be placed in a separate fund and contributed to charity.
Prince Walid said he felt no similar qualms about profiting from his investments in banks, which earn money by charging interest, a practice prohibited under some interpretations of Islamic law. ”I do not believe that banking and charging interest is against religion,” he said.
HIS schedule, which he said was unyielding, lists a precise time for everything: wake-up at 10 A.M., exercise 15 minutes later, office hours from 11 A.M. to 4 P.M, a family lunch and rest from 4 to 7 P.M. He returns to work from 7 P.M. to 2 A.M., exercises again, has dinner and observes dawn prayers before retiring at 5.
The late hours let him keep track of the American stock market, with Wall Street closing at midnight Saudi time, and to follow nocturnal habits of work that are common in Saudi Arabia, where businesses and government offices close in the afternoon heat.
Indeed, for a man who counsels patience in investing, Prince Walid displays little in his daily life.
”I despise sleeping, really,” he said, sitting cross-legged on a carpet in his football field-sized back yard, whose manicured lawn, free-form pool, Tiki torches and restaurant-style dining area suggest a Four Seasons resort. ”I think it’s a period where your brain goes stagnant.”
In conversation, the Prince is direct but also restless; even in mid-conversation, his eyes flick to one of the oversized television sets always placed nearby, tuned to the Cable News Network, CNBC or the Arabic Television Network, which he partly owns. At lunch, around an outdoor table set for 20 people, the Prince sat alone, with the nearest guest several seats away, and spent most of the meal on the telephone.
For at least eight months, he said, his stock portfolio has remained unchanged; he has seen no reason to buy shares at inflated prices and has been disinclined to sell. Indeed, the last time he sold any of his long-term holdings was in 1993, when he had to reduce his Citibank holdings by one-third to meet the Federal Reserve’s restriction on the percentage of an American bank that can be owned by a foreign investor.
Still, his most frequent calls, he said, are to the man who handles his stock investments — an American, Michael R. Jensen of Citibank’s private banking operation in Geneva. And twice a day, the Prince pores over one-page updates that summarize his holdings and track an additional 12 stocks that he will not name but that he has singled out for possible acquisition if their prices fall. These companies share a few characteristics — notably the potential for ample long-term growth.
He singled out autos as a sector that no longer held much of his interest, though he retains stakes in Hyundai and Daewoo of South Korea and Malaysia’s troubled Proton.
”I believe the industries should not be too cyclical and not facing a meltdown,” the Prince said. ”By definition, we invest in firms that are doing badly.”
The Prince was educated in the United States, at Menlo College in Atherton, Calif., and at Syracuse University, where he earned a master’s degree in social science. He speaks fluent English and was an avid soccer and tennis player until a back injury forced him to turn to swimming. He is single, after two divorces. ”I fall in love, basically, with my companies,” he said, ”and because I have no wife, that makes sense.”
But he is also very much a traditional Saudi, and at work, he wears a thobe, the traditional Arab garment, and headdress. He has insisted that his 22-year-old son be educated in Saudi Arabia, principally as a shield against what Prince Walid calls the ”great temptations” in America ”to do things that are against religion.”
Still, he wanted his son to have an American education and has arranged for the University of New Haven in Connecticut to send professors to Riyadh to teach courses from its regular curriculum to the young man and five of his friends; he intends to do the same for his daughter, who is 18.
HE is proud of his charity; he says that in an average year he gives $100 million in cash gifts to the poor, to mosques and to Saudi development programs that buy generators and build bridges for remote villages.
”It is a religious duty,” he said. ”No. 2, it is my duty as a rich man. And No. 3, it is my duty as a member of the royal family.”
Among his guests at lunch, a meal prepared by Lebanese chefs and usually including eight main courses, are five impoverished and usually elderly women selected each day from among those to whom he has given money in answer to personal appeals. Veiled, the women sit at a separate table and are later visited by the Prince.
His Riyadh office, headquarters of his Kingdom Holding Company, has a staff of 30. And on call around the world are outside advisers — from Citibank, which handles his investments; Arthur Andersen, which handles accounting; Saatchi & Saatchi, which handles publicity, and Hogan & Hartson, his law firm in Washington.
”Our goal is to work smart, not hard,” he said of his decision to contract out much of his work. In two separate conversations, he also pointed out that the first initials of his four advisory firms spell ”cash.”
His home and possessions shout the same message. The new palace, with at least five wings, includes an indoor pool in an atrium the size of a jumbo-jet hangar. Vast areas are set aside for his children and for the 150 servants who provide around-the-clock attention. A separate, private sports complex is reached by a tunnel that runs under a public street.
The Prince, who moved in just last month, said the palace sits on 35,000 square meters of land, or 8.6 acres — five times the size of his old palace complex just down the street, which he has set aside for his son. He also owns a helicopter, three jets (including a 727 and a 767) and a huge yacht whose previous owners included Adnan Khashoggi, the Saudi financier; Donald Trump, and, briefly, the Sultan of Brunei.
The Prince’s early investment in Citicorp — in 1990 and 1991, when the bank’s future was in doubt — now accounts for almost half his wealth. But some critics say the investment also represents his weakness: that he may not be a good judge of when to sell. Citigroup is down 15 percent from its peak.
The Prince defended himself vigorously against the assertion. He noted that Citigroup recovered sharply in recent months from last fall’s lows, adding that if he had succumbed to advice to sell Citi shares as the market plummeted, he would have lost hundreds of millions of dollars.
”Obviously at the right place and the right time, I’m a seller,” he said. ”But you have to choose the right time.”
Asked if he was afraid his portfolio might have already peaked in an overheated market, he demurred. ”I don’t think we have really milked the cow completely,” he said. ”I believe there is more potential for these companies to grow.”
Certainly, some of his recent investments in technology and media companies have produced dizzying returns. In March 1997, he bought 5 percent of Apple for $115 million; last week, the investment was worth $211 million. Later that year, he bought 5 percent of Netscape for $145 million. With America Online’s acquisition of Netscape this month, that holding was worth more than $500 million.
The Prince acknowledged that he has also picked his share of what have been losers — ”so far.” His worst investment? Planet Hollywood, the theme restaurant chain into which he has sunk an estimated $100 million since April 1997. Last week, he said, the investment was worth just $21 million. Other losers, he said, include his 24 percent stake in Euro Disney and his 3 percent of Proton.
Still, the Prince said he remained as loyal to his weaker holdings as to those with better returns — and as determined, if not more so, to help expand their businesses. He said he uses only Motorola phones (he owns 1 percent of the company) and stays only in Four Seasons and Movenpick hotels. He may develop as many as 44 Planet Hollywood restaurants in Europe and the Middle East. He even says he plans to replace the Mercedeses and Volvos in his personal fleet with cars made by Hyundai and Daewoo.
THE strongest impression left by Prince Walid is of his fierce pride in his decisions. One recent day, he thumbed through printouts from The Wall Street Journal, The Financial Times and The International Herald Tribune, all downloaded from the Internet long before the papers reached Saudi newsstands.
A Journal article about Mr. Buffett’s latest letter to shareholders of Berkshire Hathaway caught the Prince’s eye. Mr. Buffett, the article said, acknowledged to investors that they would have been better off last year if he had spent his afternoons at the movies, instead of buying and selling parts of his portfolio. The implication could be drawn that Mr. Buffett was thinking, among other things, about his sale of much of his stake in Travelers — and hence in its successor, Citigroup.
Prince Walid passed the clipping to a visitor. ”Buy and hold,” he said.