Voters are beginning to learn something about Steve Forbes, the GOP's flat-taxing, supply-sider Presidential candidate. But what about Forbes the investor? With an estimated net worth of $440 million, Forbes registered the most extensive holdings in the financial disclosure reports required by the Federal Election Commission and filed by all candidates last year.
BUSINESS WEEK asked four seasoned financial planners to examine his portfolio. The big surprise: Forbes, editor-in-chief of a magazine that reveres the entrepreneur and often focuses on fast-growing midsize companies, isn't following his own advice. "He just doesn't buy the kinds of things that Forbes magazine writes much about," says Harold R. Evensky, of Coral Gables, Fla., who examined the report. Forbes likes "mostly stodgy old industries" such as utilities.
Forbes's biggest holding is his inherited 35% stake (he got 51% of voting shares) in Forbes Inc., the family business. Its worth, according to widely reported estimates: $407 million. CEO Forbes was required by the FEC report only to estimate the value of his patrimony as "over $1 million." Forbes's house and farm in Bedminster, N.J. add an estimated $26.5 million to his net worth. Stocks, bonds, real estate, and gold make up the rest--between $2.6 million and $7.5 million, the FEC filing says. It puts his pay at $775,000 a year.
For a man willing to spend "whatever it takes" in a kick-your-shins campaign, Forbes turns cautious when he invests. Half his personal fortune is buried in real estate. Nearly 30% is in domestic stocks and mutual funds--almost all load funds. Individual domestic shares are concentrated in utilities (35%), banking (23%), and insurance (17%).
For some excitement, Forbes generally looks abroad. He reported $300,000 to $600,000 worth of Telefonos de Mexico stock, and he has owned telephone stock in the Philippines, Argentina, and Spain. That's a clever way to invest in emerging markets, since such countries first must modernize telecommunications.
As if his flat-rate tax proposal weren't evidence enough, Forbes's portfolio also stresses his discomfort with taxes. No oil and gas limited partnerships, but there are a few tax-free municipal bonds. And he has a tiny livestock operation on his 500 acres that generated just $9,100 in profits but justified a far larger farm-property tax abatement.
Forbes didn't have to reveal any asset sales that lost money in his FEC filing. His biggest capital gains--as much as $1 million--came from sales of the Mexican telephone stock. But there are some hints that a few deals went bad. Forbes had the misfortune of investing family money in the Washington Public Power Supply "Whoops" bonds that went into default in the mid-1980s. Their value today is mainly as historical artifacts.
PRIME CREDIT. Financial analysts generally give Forbes high marks for staying away from the riskier plays suggested by articles in Forbes magazine. With so much in Forbes Inc., he's better off diversifying, they argue. And as editor-in-chief of a financial magazine, "the potential for conflict of interest there is so great that he's better off in those mutual funds," says Martin Jaffe, CEO of Wood, Struthers & Winthrop in New York, who also looked at the report.
Forbes receives praise for leveraging his portfolio with debt--not for the campaign, which he has lent more than $14 million, but by borrowing against his farm. The documents show four 30-year mortgage loans in excess of $3 million at interest rates of 6.75% to 7.12%. So good is Forbes's credit that he could borrow $500,000 to $1 million from the Bank of New York at prime.
It may surprise some that Forbes isn't a more exciting investor. But other than his political instinct for the jugular--he has invested much of his campaign money in negative advertising--he prefers to be known as the Sam Walton of Wall Street, driving his Buick station wagon around Bedminster, 100,000 miles on the odometer. Money experts agree: Forbes's political campaign is likely to go down as his riskiest investment yet.