Investment Guru Wilbur Ross was interviewed by Fortune’s Katie Benner (read the write-up here). Ross made a name for himself by building a lucrative career finding gold in industries left for dead. In the aftermath of a financial crisis and a great economic recession, words of wisdom from the master of distress investing carry a lot of weight.
Here is what he said about the biggest investment opportunities now (emphasis mine):
In the interview, Ross also discussed the biggest challenges for investors now. Read the complete interview entitle “Mr. Distress are ready to buy”.
My personal favorite take-away from Mr.Ross is this ending sentence: "That's why the value of expertise and the ability to interpret information will someday go to infinity".
Here is what he said about the biggest investment opportunities now (emphasis mine):
There are deep value opportunities in insurance stocks, which were beaten down because of their exposure to the subprime crisis, annuities, and commercial real estate. I won't name names, but some well-managed life insurance and fire and casualty companies will come through this stronger. They used to trade at one or two times book value but now trade at three-quarters book.So some are good buys now, and some will be a in the future, Mr. Ross covered it all.
Regional and subregional banks still have a lot of issues to resolve, and they have enough commercial real estate assets on their books to make most of them insolvent on a mark-to-market basis. Of course, they won't all mark their assets to market and their loans won't all go bad. But another several hundred banks will fail before we get through this cycle. We just bought Bank United in Florida for $925 million, and the FDIC is providing about $4.9 billion in assistance.
I still like TIPS (Treasury inflation-protected securities), and I think a big opportunity is coming in the municipal bond market. Even if it doesn't default, some state or local government will come close enough to scare everyone to death. That will be a wonderful buying opportunity.
And as one of the public-private investment managers for the Treasury, we have been buying lots of residential mortgage-backed securities. The price often more than discounts the problems that are ahead. After another year or so of property value declines I think that market will stabilize along with the securitization market. Securitization is a fundamentally sound idea, even if it was poorly executed.
In the interview, Ross also discussed the biggest challenges for investors now. Read the complete interview entitle “Mr. Distress are ready to buy”.
My personal favorite take-away from Mr.Ross is this ending sentence: "That's why the value of expertise and the ability to interpret information will someday go to infinity".
