Kirk Kerkorian died yesterday at 98, and he leaves a legacy as a man who was as influential in shaping Las Vegas as anyone in the world. Kerkorian paved the way for gaming stocks as we know them today, and folded Wall Street into the leverage mix for many deals by smoothing risk for casino operators. He also was a master at understanding branding long before it became a quantifiable asset for companies and showed how to use it. He bought and sold so many assets we come across in entertainment and travel that I thought it was important to pay homage to the greatest portfolio manager of the last 100 years – he will be missed.
Kerkorian was a media-shy billionaire who was doing complex deals in his 80's and 90's, and he was lucid and sharp until the day he died. The former pilot and boxer defined mega projects and big money deals, and will be missed in the investment world for his handshake deals and horse trading ways. Colorful yet private, Kerkorian never sat ringside – he sat up in the stands at his own venues and drove old Chryslers and personally tipping surprised parking attendants.
After WWII, Kerkorian bought US bombers sitting idle and launched a shuttle service between California and Las Vegas for $60,000. After realizing he needed to pay his loan and create cash flow, he sold off the fuel (like a good PM does) during the gas shortage at premium prices. He leveraged the cash flow from the airline so he could buy land for $1 million across from the Flamingo Hotel in 1962, where he eventually built Caesars Palace. He sold the hotel and business in 1968 and banked $10 million, all for his personal portfolio.
Risking His Own Money
Kerkorian did not launch a two and 20 hedge fund – he risked all of his money on every early deal, pushing all the chips into the center of the table. His fund quietly had the same returns as Warren Buffet, but his strategy was to move behind the scenes, and never be out front or talk to the media. In fact, he never gave an interview in his lifetime.
With a war chest of cash, Kerkorian bought MGM Resorts International ($MGM) from the Bronfman family (the Seagram family funded his bomber purchase) brand and immediately started selling off memorabilia, including Dorothy's shoes from Wizard of Oz. He went on to leverage these Hollywood stars by funding and building the MGM Grand Hotel in Las Vegas with stars like Elvis Presley and the Rat Pack headlining at the his hotels, bumping the gambling profits all along the strip. Kerkorian is the reason aging stars like Britney Spears and Celine Dion headline in Las Vegas today, continuing to leverage brands and assets long past expectations. Today, his style in managing assets is copied at every hedge fund in America.
Kerkorian’s Many Legendary Deals
There are hundreds of stories about Kerkorian deals. In one case. Legend has it that Elvis Presley manager Colonel Tom Parker cut a deal with Kerkorian to gamble at his hotels and the Colonel not only lost his own money, but he also lost much of his clients money. It is rumored that Elvis worked parts of his career for free while Kerkorian reaped the benefits of huge gambling profits from fans who would play in his hotels.
Kerkorian sold MGM to Ted Turner, who sold it back to Kerkorian during the same year, but retained the rights to the movie archives, creating TCM Turner Classic Movies on every cable box in every home. High stakes horse traders like Kerkorian, Turner and Howard Hughes swapped airplanes, hotels, land and Hollywood stars like Las Vegas poker chips. They were experts at valuation long before venture capital and Silicon Valley. Yet, Kerkorian had no more than an 8th grade education.
Kirk Kerkorian was a portfolio manager who managed his own money from day one, leveraging every part of every asset and playing high stakes asset allocation long before any hedge funds were part of the picture. He traded with the private clubs of the wealthy like the Seagram's Family, Warren Buffet, The US Government, Wall Street, the auto industry, Ted Turner, Howard Hughes and others. If you made a large deal in the past few decades, chances are Kirk Kerkorian’s DNA was somewhere in it.
Amateur pilot, undersized boxer and one of the great deal makers of our time, Kerkorian will be remembered for cutting complex deals into his 90's and leaving behind a quiet legacy known by few. In my mind, he lives on as the greatest portfolio manager of the last century.
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