Follow Carlos Slim and Fatten Your Portfolio

Follow Carlos Slim and Fatten Your Portfolio

by Carl Delfeld, Investment U Senior Analyst
Thursday, June 23, 2011: Issue #1541

Do you know anyone who could be fined in the morning for a cool $1 billion for “monopolistic practices” and still have a great day?

I do.

He has built a portfolio of companies worth an estimated $80 billion, representing an incredible 40 percent of the value of Mexico’s entire stock market!

This makes Carlos Slim the world’s wealthiest individual by a comfortable margin over laggard Warren Buffett. You’ll soon see that Mr. Slim and Mr. Buffett share more than just living in homes purchased 40 years ago and driving their own cars…

Carlos Slim’s Telecom Empire

At the core of the Carlos Slim’s empire are two companies that have a lock on Mexico’s telecom market.

• America Movil (NYSE: AMX) is Latin America’s largest telecom company by assets.

• Slim also controls Telmex (PINK: TMLSF), acquired for only $1.7 billion.

These companies are being merged, setting the stage for his next move.

But this snapshot only gives us part of the story. More importantly, where is Mr. Slim headed next and how we can follow his wealth-building model to grow our own portfolios? And you can become a better investor just by paying attention to a few simple wealth-building lessons that I learned by observing him.

Five Wealth-Building Lessons From Carlo Slim

We can all become better investors by paying attention to a few simple wealth-building lessons that I learned by observing Carlos Slim…

• Follow the Growth – Mr. Slim was lucky in being born a citizen of an emerging nation with plenty of room for growth. It’s unlikely that he would’ve built his giant fortune on such a scale, and so rapidly, in a well-developed market like Canada or America.

• Follow the Monopolies – We all learned in Economics 101 that most monopolies are bad – unless you’re an investor. Slim takes Warren Buffett’s “economic moat” strategy to the extreme, going for outright control. America Movil dominates the cellphone business through Telcel, while Telmex controls 80 percent of Mexico’s landline market. Because of many emerging countries’ politics, culture and business practices, opportunities to invest in monopolies are much higher in emerging markets than western ones.

• Follow the Consumer – Slim’s companies are focused on the simple needs of consumers. Most of his companies provide a platform for people to communicate with each other – how simple is that?It seems his strategy for future growth is to smartly move up the food chain and target the rising emerging middle-class demand for value-added services such as internet content and video.

• Follow Diversification – While Slim’s telecom holdings get all the attention, he has been careful to build a widely diversified portfolio. Real estate, hotels, banking and finance, department stores, tobacco and even a 6.4 percent stake in The New York Times all have a place in his portfolio.

• Follow the Numbers and Be Mindful of Value – Getting the big picture right is important, but it must be coupled with old-fashioned number crunching. Slim’s ability to quickly read a balance sheet is legendary and his hobby of mastering baseball statistics speaks volumes about his inclination for cold-hard facts.

How Carlos Slim Keeps His Eyes on the Prize

Keeping his eye on the numbers also prevents Slim from letting his emotions get in the way of common sense. While many are pulling back from emerging markets due to their pullback and volatility, Slim keeps his eyes on the prize recently stating:

“Anyone who is not investing now is missing a tremendous opportunity.”

But his optimism about betting on the future of Latin America’s consumer is tempered by being very mindful of value and opportunistic in a time of crisis. One example is his plunge into Brazilian telecoms in 2002 as its stock market was crashing.

You and I may never top the Forbes wealth derby, but we can learn from those masters, like Mr. Slim, who show us the way.

Good investing,

Carl Delfeld