O’Leary talks his best and worst investments
The Shark Tank co-star lost with mining, won with watches
CHRIS KORNELIS Kevin O’Leary was finishing up business school at the University of Western Ontario’s Ivey Business School in 1980 when a guest speaker stood in front of the class of almost-M.B.A.s and told them they knew nothing. You may think you know it all, he remembers the speaker saying, but the minute you enter the real world you are going to get slaughtered “because you have no experience, you have no visceral gut sense on what to do and you don’t even know it yet.” Mr. O’Leary, now age 64, remembers listening and thinking to himself: “What an a—hole.”
Four decades later, Mr. O’Leary, a co- star on ABC’s “Shark Tank,” the chairman of O’Shares ETFs, says the same words that came out of that guy’s mouth
long ago now come out of his when he talks to students at places like Harvard, MIT and Notre Dame. “You can’t make up experience,” says the former dragon from CBC’s Dragons’ Den and one-time candidate for the leadership of Canada’s Conservative Party.
“You have to live it. And when you don’t have it, you make horrendous mistakes.”
Here, Mr. O’Leary recounts some of the best and worst investments he made while amassing that experience.
Worst Bet: A mining stock Investment: $25,000 Losses: $25,000 By the time Mr. O’Leary got his M.B.A., he already had some experience under his belt. In 1977, on a tip from a broker, he invested $25,000 in the stock of a mining company. He only had half of it, so he borrowed the rest, on margin, from the brokerage house. Two days later, the stock went to zero.
“I was so scared,” he says. “At that time, $12,000 of debt, which now I owed to the brokerage house, was my whole salary. It was brutal.”
He says he can’t remember the name of the company or why the stock tanked, but he remembers where he was when he realized what had happened. It was 10 a.m., he was at home, and he walked upstairs and threw up. THE TAKEAWAY: “I think you have to have those lessons” about failure, he says. “Now, I’ll never forget that feeling.”
That feeling helped inspire two critical changes in the way he makes investments.
First, he never places a bet without first asking himself: How could this go to zero? “That is always in my mind when I am making an invest- ment now,” he says.
The second is that he has learned the difference between investing and speculating. The mining company wasn’t an investment. It was pure speculation. “You should understand that when you buy a stock that doesn’t pay a dividend, that is not an investment, that is a speculation,” he says.
“Because the only way you can make money is it has to go up. And there are many periods in the market’s history where stocks don’t go up… and if the company isn’t paying out a portion of a dividend to you, you cannot make money.”
Best Bet: Patek Philippe Nautilus 5711/1A watch Investment: $28,803 Gains: About $20,000 to $30,000 in value
Several years ago, Mr. O’Leary struck up a conversation with musician John Mayer, who told him that his watch collection wasn’t just to adorn his wrist: It was also a fantastic investment. Mr. O’Leary was intrigued.
“So I did some digging.” What he found stunned him. “Watch collections are going through the roof in value. Certain Patek Philippes and certain Rolexes and other marks and makes are beating the market by miles.”
He says he became obsessed with the blue-faced Patek Philippe Nautilus 5711/1A watch.
He looked for it everywhere. He was advised to give up the search.
“A dealer in Geneva said to me: ‘Leave this disease alone, you’re infected. You will never find that watch. It will drive you crazy,’ ” he says. “Well, do you know what I’m wearing on my wrist right now?”
Mr. O’Leary eventually got a call from a dealer who had the watch. He paid retail: $28,803. Because the watch is so hard to get, people are willing to pay $50,000 or $60,000 for the watch.
Overall, watches have “been the best asset class I’ve owned in the last four years.” THE TAKEAWAY: “Listen to other people who have knowledge of other asset classes because investments aren’t just stocks and bonds,” he says. “There’s all kinds of things in the world that are moving faster than markets.”
To find those nontraditional assets, he says a person should indulge their curiosity and follow their interests.For Mr. O’Leary, a guitarist, that means spending time with artists and musicians.
“So, I try and spend 20% or 30% of my time with artists,” he says.
“That’s where you find these stories, that’s where you hear about these assets that have nothing to do with a stock or a bond.”