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05/16/00- Updated 11:17 AM ET
Bullish on techs in the Arabian desert
From tent under starry skies, prince rules $21B portfolio
By David J. Lynch, USA TODAY
RUMAH, Saudi Arabia - It's midnight at the oasis. Reclining cross-legged against a plump green-and-beige cushion, a multibillionaire Saudi prince is enjoying one of the perks of fabulous wealth: the ability to turn night into day.
Related story:
Prince injects $1B into techs, other stocks
''This is my favorite!'' exults Prince Alwaleed bin Talal bin Abdul Aziz Alsaud, flicking a switch that floods the desert with enough wattage to light a ballpark.
The prince and his entourage are in the middle of nowhere, about 30 miles northeast of the Saudi capital, Riyadh, clustered in the open air around two giant log fires. But the comforts of home - if home is a tech toy fantasyland - are everywhere.
Six NASA-caliber satellite dishes, an equal number of lavishly appointed mobile homes, computers, printers and scads of mobile phones, all are at the prince's disposal. Wide-screen televisions tuned to the CNBC and Bloomberg business news channels keep him abreast of the markets.
Tethered camels and a staff dressed as if for an episode of Arabian Nights complete the scene.
This tented compound is the weekend desert sanctuary for a man Forbes magazine says is the wealthiest individual outside the USA. Prince Alwaleed boasts a global portfolio worth more than $21 billion, and his latest move - a bold $1 billion bet on the U.S. stock market - will captivate folks on both sides of the new economy/old economy divide.
Money maker: A Bedouin tribal leader in traditional dress, right, approaches Prince Alwaleed at his desert retreat to request money. Alwaleed can afford to give away and estimated $100 million each year thanks to his market prowess. (AFP)
The prince says that since October he has put a cool $1 billion into 15 U.S. stocks, split between industrial-era staples and Internet hotshots. That's in addition to a separate $1 billion investment he announced April 6 in America Online, Compaq, Kodak and Xerox.
The latest purchases illustrate the royal verdict that, in today's break-all-the-rules stock market, so-called ''value'' investing is no longer limited to stocks bearing drowsy price-to-earnings ratios. Some tech favorites, the prince says, have been so bloodied they've become bargains - despite P-Es that still aren't for the faint of heart.
''I'm a value investor. I go where the P-Es make sense,'' the prince says. ''But to be a value investor, this may not necessarily be a sign of an old economy investor. It can be old, new or in between.''
If the prince is right - and he claims an average annual compounded investment return since 1991 of 37.4% vs. the S&P 500's 19.9% - then the current anxiety over the future of the U.S. stock market is overwrought. If he's wrong, he is going to lose a significant chunk of change.
Schooled at a Riyadh military academy and California's Menlo College, Alwaleed, 43, is the grandson of Saudi Arabia's founder and the scion of the liberal wing of the Saudi royal family. A compulsive multitasker who simultaneously entertains visitors, eats, watches TV and fields phone calls, he carries on non-stop business even in the middle of the desert.
Seated with his retinue in front of a low table groaning under the weight of roughly 50 entrees, the prince obsessively crumples facial tissues, gulps diet supplements and dispenses small talk. Late into the night, he's a bundle of nervous energy, rhythmically smacking a glasses case against his thigh when the conversation lags.
''He's like a machine gun. He's going, going, going,'' says Michael Jensen, 55, Alwaleed's Citibank private banker.
Always moving
To reach the isolated retreat tonight, the prince's fleet of Chevy Suburbans has galloped through a blinding sandstorm of the kind Riyadh hasn't seen in perhaps two decades.
Prince drinks Pepsi, likes beige
Name: Prince Alwaleed bin Talal bin Abdul Aziz Alsaud
Title: Chairman, Kingdom Holding
Home: Riyadh, Saudi Arabia
Age: 43
Marital status: Twice divorced; now married to Princess Kholood, 22
Children: Prince Khalid, 22, soon to graduate from the University of New Haven with a degree in business administration, and Princess Reem, 17, about to graduate from high school.
Education: Syracuse University and Menlo (Calif.) College
Portfolio: $21,084,000,000
Favorite drink: Pepsi
Favorite colors: Green and beige
Can't live without: CNBC and Bloomberg television
Best investment: Citicorp
Worst investment: Planet Hollywood
Quote: ''This euphoria for the new economy is fine, but the old economy companies aren't going to disappear. You're still going to drink Pepsi, shave with a Gillette and eat a (McDonald's) hamburger.''
Yet even the relentless buffeting of the wind can't dent the prince's ebullience. Seven time zones away on Wall Street, panicked investors, nervous about rising interest rates and speculative Internet fever, have been selling. And the prince has been buying. A lot.
''Do it! I'm here. Call me until 6 in the morning,'' he barks into the phone, shifting fluidly between Arabic and English.
Alwaleed is never more than a wedge shot from a TV screen. But he derides most of the televised market chatter as ''nonsense talk.'' His guess is that about 10% of the on-air experts know what they're talking about.
As he talks, watches television and works the phones, another part of his weekly weekend ritual unfolds: An array of Bedouin tribal leaders clad in traditional dress assembles before him. Some are yell-singing his praises.
Reflecting the informal ties that knit Saudi society, the Bedouin leaders come here to ask Alwaleed for money. Most do so in the traditional manner, kissing his shoulder while kneeling before him for abbreviated, and usually one-way, conversations.
The prince can afford to give away an estimated $100 million each year thanks to his market prowess. After his father staked him $270,000 in royal family seed capital, he made his first bundle speculating on real estate and stocks and from multimillion-dollar commissions on business deals he arranged for several Korean companies.
His first big score came in 1991 when he bought $790 million of Citicorp stock. The stake is now worth about $8.6 billion.
The past decade, his portfolio has grown to include top tech performers such as News Corp., America Online, Apple and Motorola, plus hotels such as New York's Plaza and the George V in Paris. He's also developing the 1,000-foot-high Kingdom Centre shopping, office and residential complex in Riyadh.
Wondering about the wealth
Some observers question whether all this cash really belongs to the prince. The Economist magazine last year raised doubts about the math behind Alwaleed's portfolio, alluding to rumors that he is really a front man for other publicity-shy members of the Saudi royal family.
The prince says not so, and Jensen adds, ''To the best of my knowledge, every penny is his.''
At the same time, the prince also has blundered. He put $320 million into Disneyland Paris and saw it slide to $261 million. And $110 million worth of Planet Hollywood has shrunk to $40 million, thanks to an ill-conceived move beyond the chain's restaurant origins. ''Sometimes, we get it wrong,'' he shrugs.
When Alwaleed goes stock shopping, he zeros in on battered brands: companies such as Coke, Ford or Disney that retain dominant positions in their industries but have been punished by the market for short-term missteps. ''We're obsessed with brands. Inevitably, no matter how strong the brand, one day it will be hammered. Look at Microsoft,'' the prince says.
In buying a stock, the prince begins with the end result - the desired rate of return. He'll spend months evaluating companies before buying. He uses the time both to understand the company's prospects and to wait for it to drop to ''his'' price. That's the number that will provide his required 20% gain.
''We wait until these companies' (share prices) come to us,'' Alwaleed says, sipping sweet tea beneath the starlit sky. ''If the fundamentals are right, we just do it.''
Waiting and watching
Research and patience are the hallmarks of Alwaleed's investing style. Sprawled inside an air-conditioned tent, he gestures toward his weekend's homework: analysts' reports from Merrill Lynch, Salomon Smith Barney and Goldman Sachs plus The Silicon Boys, a recent book about Silicon Valley, and the latest issue of the journal Foreign Affairs.
After a visitor leaves around 1 a.m., he'll walk in the desert and read until going to sleep at 6 a.m.
The prince is backed by a lean, 20-man staff at his Riyadh-based holding company, Kingdom Holding. He also draws on eight private bankers at Citibank's Geneva offices.
Jensen, who heads that group, says his No. 1 client is the antithesis of the momentum investor that has dominated the late-1990s bull market.
Indeed, Alwaleed welcomes the recent market correction as a much-needed antidote to speculative froth. But as a long-term investor who rarely sells, he doesn't know or care whether the overall market has yet hit bottom. He's buying individual stocks because they have reached his target prices, not because he's decided the major indices are done dropping.
''He does not try to pick the bottom,'' says Jensen. ''There may be people in the market who are prescient enough to do that. But His Highness doesn't try to.''
All this success could go to a guy's head. And it has. An inveterate name-dropper, the prince says in Kingdom Holding promotional literature that he is ''the equal'' of world leaders, including President Clinton. Discussing an upcoming trip to the USA, he invokes as business contacts in a single run-on sentence the names of Citigroup CEO Sandy Weill; Michael Bloomberg, the billionaire owner of the eponymous news service; Merrill Lynch Internet analyst Henry Blodgett; and Goldman's bullish equity maven Abby Joseph Cohen.
''We have a tremendous story. We are one of a kind,'' he enthuses. ''I'm called the (Warren) Buffet of Arabia.''
Still, all the self-promotion somehow seems almost endearing. In the course of an almost 5-hour evening, the slow-to-warm prince ultimately impresses as a market savant - and one with valuable advice even for those who don't have a billion dollars to invest.
''I'm optimistic about the U.S. This (expansion) could sustain itself for another three to five years,'' he says. ''(But) you can't just buy everything. If you're selective and know what you're doing, then you're in good shape.'' |
