Sam Wyly's Interesting Life

Sam Wyly had an interesting life. From leveraging $1000.00 of his own money into purchasing some expensive hardware to billionaire and back to bankruptcy he's been through a lot of shit.

I wanted to distill what I learned from him into useable information for my future investment practice. Breaking down his stories is very informative as he has a tonne of useful information in each one and explains what he learned himself to better his career in the future. Here is what I took away from his story:

1. Don't only invest in quantitative aspects of a company, the people matter too.

2. Leverage can be good... When used correctly and in the right people's hands.

3. Get out when the going is good and the market is exuberant.

Sam was looking to acquire a lot of companies in his time, but there was one company (the name escapes me, but it was a tech company) that he wanted more so for a specific person that was in the company than the tangible assets of the company.

Although reading financial statements, getting high ROE companies with big runways is always the goal, finding the right people who are in the company and can keep taking a company or a corporation is a necessity. Discovering these hidden diamonds can still be a benefit if I decide not to invest in a company, because somewhere down the road they may be acquired, or leave for a different company that can open up other opportunities.

Sam had to find financing all throughout his career. He said himself in his book that he'd prefer using other people's capital to fund his entrepreneurial adventures. I think this is great when debt is in the hands of a competent allocator who has skin in the game. But I think those two qualities are lacking in a large percentage of publicly traded companies.

Nearly all of the great investors I've followed have noted that staying away from leveraged companies is generally a very good idea. I agree. However, as Sam showed, there are exceptions. Capital allocators who can compound money at high percentages on debt (ROE or ROIC) often result in huge growth and multi-baggers.

Lastly, he made some fine exits on his investments. The one that sticks out the most to me was when he sold Sterling Software to AT&T for 3.9 billion right around the height of the tech bubble. He never claimed to time the top of the market, but you could tell from his story that he followed very closely how the market viewed his companies and acted accordingly.

I know I'll never be able to time the top or bottom of the market. I've been enjoying listening to Mohnish Pabrai echo the sentiments of Charlie Munger and how he doesn't sell when his companies get to intrinsic value or even exceed. He notes this is the key to multi-baggers, sitting on them and letting them work their magic.

In closing, I've been studying away at investing and learning more about both quantitative and qualitative analysis. It's always important not to swing too far to one side and remain rational in all investment decisions. Sam Wyly really imprinted on me that business isn't all about numbers, but about the people, he brought in to help achieve great things.