Investing across the board — in steel, coal, textiles, auto parts and now mortgages — there’s not one common strain so much as one common system. At WL Ross & Co., they use a chart system. They take an industry and delineate anything they see that’s wrong. Next, they draw up a second chart and point to things they’d change if they had control. If the two charts can be brought together, then it makes sense to invest.
By going after a whole industry, he said, "We think we get the best bang for the buck," profiting from recovery in the company and "the change in the overall context” of the industry. Expertise development begins with looking to industries a few years out from going bad to take some time and get into them.
He uses coal as an example of an industry with problems like high fragmentation and environmental regulatory issues. He invested in companies like Horizon Natural Resources, which was in Chapter 22 — its second bankruptcy in 18 months, having initially emerged with way too much leverage and benefits baggage — cut the dead weight and created an enterprise unshackled from the dead weight.
So what’s a typical day like for Ross? "Running for an airplane." And if he’s in New York City, it normally begins with a video conference at 7:00 a.m. or 7:30 a.m., and by the time the market opens, "you've lost control of the day because it's whatever comes in at you that you have to deal with."
At the company, Ross sticks to its knitting. "My wife often accuses me of trying to reinvent the 19th century," he said, being that they're better at grinding away at industries like coal and auto parts than taking on things like computers.
Fielding a question from the audience on his biggest regret or error in judgment: "Not buying the business from Rothschild sooner," he said, pointing out he did it April 1, 2000. Had he done so five years earlier, "I'd be a lot better off." — Carolyn Murphy
