Carlos Slim’s Mexican holdings from mining to communications helped him beat Bill Gates and Warren Buffett on the stock market for the second straight year, and gains in 2011 may widen his lead atop the global wealth list.
Slim’s publicly disclosed holdings surged about 37 percent to $70 billion in 2010, with wireless carrier America Movil SAB representing $48.9 billion of that wealth, according to data compiled by Bloomberg. The 22 percent jump in Berkshire Hathaway Inc. shares wasn’t enough for Buffett to catch up, and Gates’s Microsoft Corp. fell, hurting his returns even as he spread his investments to other companies.
Mexico will be “the emerging market of 2011,” boosting Slim’s holdings, said Walter Molano, head of research at BCP Securities Inc. in Greenwich, Connecticut. Growth will come from an economic expansion in the U.S., Mexico’s top trading partner, and from investors looking for growth opportunities outside of Brazil, Russia, India and China, he said.
“Slim is in for a very good year,” Molano said in a phone interview. “With China overheating, and clearly Brazil looking like a very crowded trade, people are starting to look at Mexico as an alternative.”
Emerging markets in Latin America and Asia are in an “enviable” position for growth, with rising consumer demand and low interest rates, Slim, 71, said in November. America Movil shares rose 15 percent in 2010 as the number of Latin American mobile-phone owners neared 100 percent of the population.
Slim’s best-performing asset last year was one of his oldest, holding company Grupo Carso SAB, which almost doubled as it prepared for this year’s spinoff of its mining operations amid soaring gold and silver prices. His biggest loss came from a stake in publisher New York Times Co., which fell 21 percent.
Slim’s publicly disclosed shares in U.S. markets represented less than $500 million of his total holdings, with the rest in Mexican companies.
Investors in Latin America should focus on stocks that are exposed to Mexican domestic demand, which is increasing as local consumers have more money to spend after last year’s growth in manufacturing exports, Stephen Graham, a Goldman Sachs Group Inc. analyst in Sao Paulo, said in a research note this month. He is forecasting Mexico’s IPC index will gain 9 percent this year, about half the growth rate forecast for Brazil’s stock market index, after a 20 percent rally in 2010.
Gates, the founder of the world’s biggest software maker, has boosted his exposure to emerging markets, with stakes in Mexican broadcaster Grupo Televisa SAB and beverage bottler Coca-Cola Femsa SAB. Even with that diversification, holdings publicly disclosed by Gates, 55, amounted to about $26 billion at the end of 2010, down more than 8 percent from 2009. Holdings in Microsoft represented $16.7 billion of the total, after Gates reduced his stake in the company by 80 million shares.
Arturo Elias, a spokesman for Slim, said the Mexican billionaire’s comments in a news conference this week addressed his plans for the year. Slim said he would spend $3.66 billion this year on Mexican telecommunications, mining and infrastructure projects. America Movil is spending $8 billion a year through 2014 to prepare for growth in the demand it anticipates for data services such as Internet access and video.
Michael Larson, who manages Cascade and the Bill & Melinda Gates Foundation’s investments, didn’t return two phone messages seeking comment. Buffett didn’t respond to a request for comment e-mailed to his assistant, Carrie Kizer.
The data compiled by Bloomberg didn’t include the money the billionaires have given to charities, including the Gates foundation. Forbes magazine, which in October named Gates the richest person in the U.S. with a $54 billion fortune, said 70 percent of that amount is held in his Cascade Investment LLC fund. That fund has only disclosed $5.8 billion in holdings on the stock market, an amount that was included in the Bloomberg calculation of Gates’s holdings.
Buffett’s holdings were calculated from his shares of Berkshire Hathaway, his investment company that holds stakes in Wells Fargo & Co. and Coca-Cola Co. Berkshire’s A shares gained 21 percent last year and its B shares rose 22 percent. Buffett holds both classes.
Part of Slim’s success last year came simply because his holdings are mostly in Mexico, a country where investing is riskier than in the U.S., said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington. If the comparison between Slim and Buffett’s stock performance last year were adjusted for risk, Buffett may have come out ahead, he said.
“In good times Berkshire won’t go up as much, and in bad times it won’t go down as much either,” he said. “For a stock that doesn’t move much, a 22 percent return is great.”
Slim’s performance last year would have beat those of Buffett and Gates even if the U.S. billionaires hadn’t sold off shares of their companies. Buffett, 80, gave $1.6 billion in shares to the Gates Foundation in July as part of his plan to donate 99 percent of his wealth in installments.
Thanks in part to donations from Buffett and Gates, the Gates Foundation had $15.4 billion in stock-market holdings at the end of 2010, more than double the previous year’s total. The organization’s biggest gainers included Caterpillar Inc., AutoNation Inc. and U.S.-listed shares of Slim’s America Movil. Berkshire Hathaway is the foundation’s largest holding.
Gates unloaded 80 million Microsoft shares as part of his diversification of his investments in other companies through Cascade Investment. Among his most successful investments last year were Strategic Hotels & Resorts Inc., whose shares almost tripled, and AutoNation, which gained 47 percent. Microsoft was one of his worst performers, dropping 8.4 percent in 2010.
While Slim’s Telefonos de Mexico SAB, the state-owned monopoly he acquired in 1990, was his second-worst investment in 2010, the carrier’s 2001 spinoff America Movil continued to be his most important success. The company began as a Mexican carrier in the early days of the mobile-phone business and, through acquisitions, became Latin America’s largest wireless company and Mexico’s biggest publicly traded firm.
Slim and Gates became wealthy through similar bets in new technologies, and were helped by their dominant market positions, said Thomas Russo, who manages about $4 billion at Gardner Russo & Gardner in Lancaster, Pennsylvania.
“They basically had the privilege of owning a monopoly with enormous pricing power in markets that grew,” Russo said. “The consumer-PC business fueled Microsoft’s wealth, and the rollout of telephone services Carlos has been able to control over decades.”
The son of a Lebanese immigrant who ran a dry-goods store in downtown Mexico City, Slim built his fortune by buying real estate and assets such as a bottling company and a cigarette maker during periods of economic crisis in Mexico. His move to take control of Telmex in a 1990 privatization sale helped catapult him into the ranks of the world’s richest people.
Forbes named him the wealthiest person in the world last year, followed by Gates and Buffett.
Slim and his family control 42 percent of America Movil’s shares. They hold a stake of 79 percent in Grupo Carso and 55 percent in Grupo Financiero Inbursa SAB, a financial services company that has tripled its branches since the end of 2008.
While America Movil is based in Mexico, Slim has exposure to other countries in the region, said Molano of BCP. America Movil gets about 65 percent of its revenue from Mexico, with the rest coming from other countries in the region including Brazil, the U.S. and Colombia.
Mining, Luxury Goods
Slim’s best-performing and biggest foreign holding was Saks Inc., the luxury retailer that gained 64 percent last year. Slim’s investment vehicle Inmobiliaria Carso holds a 16 percent stake in Saks. Inmobiliaria Carso has 6.9 percent of the class A shares of Slim’s worst performer, New York Times, plus options to increase that stake to 16 percent.
Carso’s mining spinoff Minera Frisco SAB made its debut on Mexico’s stock market on Jan. 6 and has gained 78 percent since as investors snapped up a new way to gain exposure to the country’s precious metal production. Frisco fell 83 centavos to 53.53 pesos at 4 p.m. New York time in Mexico City trading.
“As commodities continue to perform well, people are going to start digging into the incredibly rich veins of metals sitting right below the surface in Mexico,” Molano said.