New York - Donald Sterling, forced to sell his National Basketball Association team after a lifetime ban for making racist comments, is not going to be remembered as a “visionary”, “icon” or “oracle” – terms attached over the years to renowned business personalities such as Bill Gates, Steve Jobs and Warren Buffett.
But Sterling’s winning bet on the Los Angeles Clippers 33 years ago means he is in their company when it comes to blowout investment returns.
Sterling laid out about $12.5 million (R132m at Friday’s exchange rate) for the team in 1981, then a perennial basement dweller called the San Diego Clippers.
On Thursday the family trust, now in control of the team, agreed to sell it to Gates’s successor at Microsoft, Steve Ballmer, for $2 billion, more than three times its estimated value just a month ago.
That is 160 times the amount Sterling paid for the team, or equal to a gross, pretax return of 15 900 percent. With a compound annual return of more than 16.6 percent at that selling price, Sterling’s Clippers rank right up there with many of history’s famously winning bets.
Using that same chunk of money in early 1981, he could have picked up shares of Apple at a split-adjusted price of $4.27 a piece shortly after Jobs took the company public in late 1980. Jobs died in 2011.
But even with the iPhone maker now at $633 a share, Sterling’s $12.5m would be worth just $1.86bn, or an annual return of 16 percent. So Sterling has done about $144m, or 60 basis points a year, better with the Clippers.
That said, he would have been well advised to seek out a “young” investor working out of the offices of an obscure holding company headquartered out on the US prairie.
In early 1981, Sterling could have had shares of Berkshire Hathaway, whose chairman, Warren Buffett, was then 50 years old and still some years from being recognised as the “Oracle of Omaha,” for about $425 each.
Had he done so, that same $12.5m today would be worth $5.65bn, an annual return of 20.35 percent. But perhaps the best bet Sterling could have made was with Gates.
Microsoft was not an option in 1981, as it did not go public until 1986, at $21 a share. But had he thrown in the towel on his then perennially losing team in 1986, his $12.5m would now be worth $7.3bn after nine stock splits are taken into account. Still, even if he missed the boat on Berkshire and Microsoft, his pick of the Clippers beat most other investments he could have made at the time – stocks, bonds, gold, property and even wine. – Reuters