RICH PICKINGS: Comeback kids

A year after the collapse of Lehman Brothers, some of our wealthy entrepreneurs are well and truly back in town. In fact, a handful of Australia's super rich have even increased the value of their holdings despite the downturn.

Meet the comeback kids. A year after the collapse of Lehman Brothers and the onset a global equity slump, a group of wealthy Australian investors including James Packer, Kerr Neilson and Gerry Harvey have managed to recoup their losses – and then some.

Every investor of super fund members knows Australia’s sharemarket has been on a rollercoaster over the last 12 months. Between October 1, 2008 and March 6, 2009, the ASX 200 plunged from 4794 to 3145, a fall of some 34.33 per cent.

Many of Australia’s wealthiest entrepreneurs were hit hard. James Packer’s portfolio (based around his stakes in Crown and Consolidated Media) shed more than $1.5 billion, while Fortescue Metal Group founder Andrew Forrest lost more than $2 billion, and China-based solar entrepreneur Shi Zhengrong (of Suntech Power) lost around $1.5 billion.

But those dark days are a fading memory. The ASX 200 is now back above 4800, about 0.3 per cent above where the index sat at the start of October last year.

And our wealthy entrepreneurs are well and truly back in town. In fact, the wealth of the nine rich list members below has increased by an average 40 per cent since October last year.

NAMEValue of stake at 1/10/08 ($m)Value at 6/3/09 ($m)Current value ($m)Loss/gain since start of GFC ($m) per cent change since start of GFC
Kerr Neilson
Gerry Harvey
James Packer
Ian Norman
Reg Rowe
Chris Morris
Paul Little
Edmund Bateman

The biggest rise in pure dollar terms was recorded by Kerr Neilsen, founder of funds management group Platinum Asset Management. Like so many financial services stocks, Platinum was sold off in the wake of Lehman's collapse, but the company’s share price has risen even faster than the broader market.

In percentage terms, the performance of Reg Rowe can’t be beaten. He is the founder of retail group Super Cheap Auto, which has become a darling of stock pickers looking to cash in on the downturn trend of consumers shopping for bargains. Indeed, Super Cheap’s shares price barely suffered during the bear market and Rowe’s stake has more than doubled in value in the last 12 months.

Harvey Norman founder Gerry Harvey has also ridden out the downturn in fine style, with the value of his stakes in the retailer jumping 43 per cent in the last 12 months. This has been somewhat of a surprise, as Harvey Norman’s sales growth has been weak during the downturn, and margins have been under severe pressure.

Toll boss Paul Little and Primary Health Care fonder Ed Bateman have also well and truly shaken off the effects of the bear market.

But before we start to praise our rich investors as market beaters, it is important to note that of the group of 30 of Australia’s richest investors we regularly track, more than two thirds have failed to recover their fortunes to October 2008 levels. Indeed, the total wealth of this group (which also includes luminaries such as Frank Lowy, Kerry Stokes, John B Fairfax, Paul Ramsay, John Grill, Clive Palmer, Gordon Merchant, Doug Rathbone and Graham Turner) has still fallen from $32.1 billion to $28.6 billion over this period.

More than a few of our richest entrepreneurs remain deeply under water.

Take, for example, Transpacific Industries boss Terry Peabody, whose company was forced to take on a cornerstone investor to help it escape from under a huge mountain of debt. His stake in Transpacific was worth $683 million on October 1 last year, but is now worth just $160 million.

Or Shi Zhengrong, of Suntech Power, whose stake has fallen in value from around $2.6 billion to around $1.1 billion – still impressive, but a long way from recovery.

Linc Energy boss Peter Bond has also experienced the highs and lows the market can bring. Back in October 2008, he was on top of the world, with a stake worth just over $1 billion. By March 6 that was down to $245 million, and it has only recovered slightly, to be worth about $327 million. Ouch.

The moral of the story? If you’re a typical super fund member or investor who stayed out of the market during the last 12 months, your portfolio is probably recovering better than those our richest entrepreneurs.

Still, I’m finding it hard to shake the feeling that many of us missed the chance to buy into these billionaires’ companies at rock-bottom prices.

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