No one wants to give away his secrets, but eventually you can identify patterns. A good example is the Fortress Investment Group. Is the secret to Fortress Investment Group success – “Something Old & Something New & Something Borrowed?”
Buying Old Railways
Some people want to invest in what’s glitzy simply for the sake of having the in thing. It may be valuable today and worthless tomorrow. But, that isn’t how wealth is built.You might see a soccer player make a bicycle kick goal and everyone comments. Was this the first bicycle kick ever? No. So, what is the big deal? Then, the stock for bicycles might increase dramatically. But, that is not how the Fortress Investment Group gauges value. It looks at long-term value from real assets.The Fortress Investment Group has a duty to its shareholders to add real assets that are necessary for global production. That is why the Fortress has invested in boring railroads.There was a time when railroads were exciting. They were the supersonic jets of today. But of course, technology has been upgraded and many tracks are rusting.The Fortress Investment Group has invested in these rusty old relics. Some might think that these have seen better days. But, Fortress thinks otherwise – merchandise must reach the stores and the Florida East Coast Railway still has value.
While other firms do not have the capital or expertise to make the old railways valuable, Fortress does. Its business model includes taking an old dilapidated asset, cutting off the rusty portions and polishing it for resale. These new IPOs receive the attention of the top institutional investors. Due to the growth in American wealth, there are numerous institutions brimming with cash, which needs to be invested. Fortress provides them with new investments to wet their whistle.The IPO might be for railways, senior living, casinos or resorts. Fortress has a nice variety of assets under its umbrella. With the SoftBank acquisition of the Fortress Investment Group, some Asian assets might be added to the mix.
It is difficult to imagine Capitalism without borrowed funds. For some reason, the banks seem central to the entire equation. Some people create startups on their own credit cards, but that is few and far between. The Fortress Investment Group borrows funds to make its purchases. The shareholders and bond holders provide the money. They hope that Randal Nardone and company will deliver ample profits. Some businesses are simply cash-intensive and cash-poor. Others require a large overhead expenditure to maintain their operations. No matter how you slice it, the Fortress Investment Group will always have a valuable duty to perform because its capital will always be needed. The Fortress has a solid strategy. It buys cheap old undervalued assets. It turns them into new IPOs that compete in the modern world. It uses borrowed funds to make this a reality. The Fortress executives have learned their lessons well.