RICH PICKINGS: Long road back

Australia's 20 richest equity investors lost 44% of their wealth in 2008-09, but there are signs that they have started to rebuild their fortunes.

If you are a typical investor, it’s unlikely that you bothered to celebrate the end of the 2008-09 financial year. Let’s face it – it was a shocker.

The credit crunch paralysed global markets and almost led to the collapse of the financial systems. Corporate giants crashed into receivership. The commercial property market has been hammered. And the S&P/ASX 200 crashed 24.2 per cent, spilling red ink over everyone’s portfolios.

But take heart. Nobody, not even Australia’s 20 richest sharemarket investors – a list that includes James Packer, Frank Lowy, Gerry Harvey and Andrew Forrest – managed to escape the carnage.

Analysis of the performance of their stakes reveals their total wealth fell a staggering 44 per cent over the course of 2008-09 from $30.1 billion to $16.7 billion.

NameValue at 30/6/2009 ($m)Value at 30/6/2008
($m)
% change
James Packer
2857
3743
23.6
Frank Lowy
2026
2924
-30.7
Andrew Forrest
3820
11994
-68.2
Kerr Neilson
1327
1002
32.5
Shi Zhengrong
1097
2309
-52.5
Kerry Stokes
521
706
-26.2
Len Ainsworth
530
894
-68.9
John Gandel
665
737
-9.7
Gerry Harvey
1028
819
25.5
Terry Peabody
204
612
-66.7
John B. Fairfax
255
634
-59.7
Paul Ramsay
864
769
12.4
John Grill
774
1231
-37.1
Clive Palmer
160
405
-60.6
Mark Rowsthorn
92
238
-61.4
Ian Norman
578
461
25.5
Gordon Merchant
274
338
-19.0
Paul Little
231
222
3.8
Peter Bond
307
40
665.0
Chris Morris
502
512
-2.1
Three big losers stand out. Andrew Forrest’s fortune fell from $12 billion to $3.8 billion over the period as shares in his iron ore miner Fortescue Metals were hit by the savage slump in commodity prices.

The king of Australia’s waste management sector, Terry Peabody, saw the value of his stake plunge 66.7 per cent from just over $600 million to just over $200 million, as Transpacific desperately tried to find a way out from under its mountainous debt.

John B Fairfax, patriarch of the Fairfax family and director of Fairfax Media, also took a hammering as the company’s advertising revenues dried up. The value of his stake dropped 59.7 per cent from $634 million to $255 million over the year.

But there were a few bright spots. Shares in Kerr Neilson’s funds management business Platinum Asset Management rose 32.5 per cent across the year, boosting the value of his stake from $1 billion to $1.3 billion.

Despite Harvey Norman’s problems with falling consumer spending, Gerry Harvey actually managed a reasonable year, with the value of his stake increasing 25.5 per cent from $819 million to just over a $1 billion. Welcome back to the billionaire’s club, Gerry.

The biggest winner in terms of percentage gains was Peter Bond, chief executive of miner Linc Energy. The company’s shares jumped more than 665 per cent, from 20 cents to $1.53 over the course of 2008-09, taking Bond’s fortune from $40 million to $307 million.

But while 2008-09 was ugly, it should be noted that the fortunes of the rich are recovering much faster than the average investor.

Since December 30, 2008, the S&P/ASX 200 has increased just over 6 per cent, while the fortunes of the 20 richest investors have climbed more than 17 per cent.

James Packer has done particularly well, with the value of his sharemarket investments (including stakes in Crown, Consolidated Media, Sunland Development Group, Challenger, Energy World Corporation, Wild Horse Energy and Magellan Flagship Fund) rising 23.5 per cent from $2.3 billion to $2.8 billion.

Andrew Forrest is also roaring back up the rich ladder in a big way. His stake in Fortescue has jumped from $1.9 billion to $3.8 billion since the start of the year.

Over in the United States, solar power entrepreneur Shi Zhengrong is also rebuilding his shattered fortune. While the value of his stake in the company has risen from $US718 million at the start of the year to just over $US1 billion, it's worth noting that is down from $US2.3 billion a year ago.

John Grill, chief executive of engineering firm WorleyParsons, has also had a good start to the year, with his stake jumping from $459 million to $774 million.

So how are these rich entrepreneurs rebuilding their wealth? Here are four quick strategies we are seeing:

– They are looking for new markets. John Grill’s WorleyParsons has been hit hard by the troubles in the resources sector, but has worked hard to move into new sectors. For example, the company recently won lucrative contracts with the Egyptian nuclear energy agency. 

They are riding high on M&A speculation. The collapse of Rio Tinto’s investment deal with Chinese miner Chinalco helped Andrew Forrest’s Fortescue Metals Group as investors placed bets on whether FMG might be a new target for the Chinese.

They are staying sheltered from the storm. Paul Ramsay has two major investments: Prime Media and Ramsay Health Care. The first is being pummelled as a result of the downturn, but Ramsay – which is benefiting from the long-term trend of Australia’s ageing population – is flying and upgraded its profits in May.

They are receiving a helping hand from the government. Gerry Harvey has been talking down the affect of the government’s cash handouts, but there is little doubt they have helped his business weather the worst of the downturn.  

They are pulling out of deals. Shares in James Packer’s casino business Crown surged when it announced it was out of a deal to buy US gaming business Cannery. As we’ve said before, not doing something can be just as smart as actually making a deal.

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