Alwaleed bin Talal: Saudi Arabia's Warren Buffett

The richest man in Saudi Arabia, Prince Alwaleed bin Talal, is often referred to as the 'Warren Buffett of Saudi Arabia.'

Like Buffet, Alwaleed made his fortune through astute investments. In August 2018, he announced a $250 million investment in Snap Inc.(SNAP) that would give him a 2.3% stake in the company.

Here is an overview of how Prince Alwaleed bin Talal used a relatively small amount of money to build one of the world’s most valuable investment portfolios.

After graduating from college, Alwaleed bin Talal borrowed $30,000 from his father to start an investment company. He lost all of that money within the first twelve months of operations, and, as a result, was forced to start again from scratch. Fast forward to today, more than 35 years since launching his career in business, Alwaleed is one of the world’s wealthiest and most successful investors. As of August 8, 2018, the company he started in 1980, Kingdom Holding Company, had a market capitalization of 33.35 billion Saudi Arabian Riyals or $8.89 billion, as reported by Google Finance. Alwaleed’s majority equity stake in the company pegs his personal net worth at more than $18.7 billion at the time of writing. As a devout value investor, Alwaleed uses Kingdom Holdings as a vehicle to hold an internationally diverse portfolio of businesses operating in many sectors including banking, real estate, and healthcare. His most notable investments include sizeable stakes in Four Seasons Hotel Ltd., Citigroup Inc.

In addition to controlling a large investment portfolio, Alwaleed owns a 460,000 square foot palace that requires a staff of 100 to maintain as well as a Boeing (BA) 747. In 2015, Alwaleed made headlines in the financial media around the world after pledging to give away the vast majority of his wealth to fund important charitable causes around the world.

Alwaleed’s journey to his multi-billion dollar fortune is not a rags to riches story. At his birth in 1955, Alwaleed became a member of the House of Saud, the wealthy royal family of Saudi Arabia. He is the grandson of Saudi Arabia’s first monarch, King Ibn Saud, and the nephew of the nation’s last King, Abdullah Saud. Also, Alwaleed’s father, Prince Talal, was once the finance minister of Saudi Arabia while his mother, Princess Mona Al Solh, was the daughter of the first Prime Minister of Lebanon.

As a Saudi, Alwaleed was raised in a household that practiced the Islamic faith. He also showed early signs of future entrepreneurial success during his childhood. In Alwaleed: Businessman, Billionaire, Prince by Riz Khan, Alwaleed’s mother stated, ‘‘Even as a child, you [could have seen] the determination he [had].’’ In the same book, a childhood friend by the name of Raid El Solh further explained, ‘‘[Everyday after school Alwaleed and I] had one hour of Monopoly and practically every time, he beat me. I think I had brains to be able to resist his onslaught, but he always managed to beat me in Monopoly, so I knew he was going to make money.’’

In his teenage years, Alwaleed started to become rebellious, and as a result, his parents enrolled him in a military school to instill some discipline in their son. At the age of twenty, Alwaleed left the Middle East to study business administration in the United States. He graduated with a bachelor’s degree from California’s Menlo College in 1979, before receiving a master’s degree in social science in 1985 from New York’s Syracuse University. (For related reading, see: Five Wildly Successful Value Investors.)

Following the completion of his bachelor's degree program in the United States, Alwaleed returned home to Saudi Arabia to launch a career in business. At the time, the nation was experiencing an economic boom. 

During that era, Saudi Arabia required foreign companies that were interested in operating in the country to have partners and representatives who were citizens of the kingdom. This created a lucrative opportunity for local businessmen who wanted to profit from the large amount of foreign direct investment (FDI) occurring in the country. As a result, many people, including Alwaleed, became local representatives for international companies and then charged these companies a commission on every deal they conducted in Saudi Arabia. These commissions ranged from as little as 5% to as much as 30% of a transaction.

Although Alwaleed worked with foreign companies and developers to help them get their projects off the ground in Saudi Arabia, he often chose not to receive a commission explaining that he, “hated it,” because it was a, “very quick way to make money.” Instead, Alwaleed took actual ownership stakes in the projects he helped to facilitate. He used this concept on his first major contract, which came in 1982 when he was contracted to construct a club for a South Korean-based company. Additionally, the deals that made Alwaleed an upfront commission helped to provide him with enough cash to slowly build a modest real estate portfolio on the side. Thanks to a series of successful contracts and Saudi Arabia’s no income tax, Alwaleed had amassed a personal net worth of $1 billion by the start of 1989, exactly one decade after graduating college. (For more, see: 6 Rules From 6 Of The World's Top Investors.)

During the mid-1980s, Alwaleed began to diversify Kingdom Holdings' investment portfolio. One of his first and most notable investments was 7% equity stake he slowly acquired in United Saudi Commercial Bank, a publicly traded local bank that was on the brink of collapse. Through a hostile takeover, the first of its kind in Saudi Arabia, Alwaleed worked with the other major shareholders of the bank to change its management and overall direction. His strategy was successful, and the bank was ultimately acquired by Samba Financial Group, the kingdom's largest financial institution.

It was in the 1990s when the name "Alwaleed" began to get attention in the Western world of business and finance. At the dawn of that decade, Citigroup was undergoing a lot of problems. In addition to failing to meet the Federal Reserve's capital requirements, many of the loans in the bank's portfolio were not being paid. This caused many shareholders to believe that the bank would fail and, therefore, resulted in a sizeable fall in the company's stock price. Alwaleed, on the other hand, believed that Citigroup's crisis would be short-lived. He took advantage of the low share price and purchased a 4.9% stake in the company for $207 million. The value of his Citigroup investment has since soared, and it remains a core part of the Kingdom Holdings portfolio.  

Since then, Alwaleed has profited from many others investments in a wide range of well-known companies including Twitter, where he was one of the company's earliest investors before it went public, and News Corporation, the giant conglomerate that owns the Wall Street Journal and HarperCollins publishers. 

In his statement announcing his large investment in Snap, Alwaleed stated "Our investment in Snapchat is an extension of our strategy for personal investment in new technology through leading companies."

Alwaleed revealed in an exclusive Bloomberg TV interview broadcast Mar. 20, 2018 that his Jan. 27 release from an 83-day detention in the Riyadh Ritz-Carlton hotel was secured via "a settlement with the government." He would not disclose the monetary figure, but the Wall Street Journal estimated the figure to be "at least $6 billion." Alwaleed told Bloomberg that "there were no charges" levied against him.

Alwaleed had been arrested on Nov. 4, 2017, in a major crackdown on alleged corruption, which Talal has referred to as a "misunderstanding." The arrests reportedly had been ordered by his own uncle and cousin. The allegations against Prince Alwaleed included money laundering, bribery and extorting officials. 

Despite being born into a royal family, Prince Alwaleed bin Talal, for the most part, built his fortune on his own. After graduating from college, he started a business with a relatively small loan from his father. He eventually built it into a billion-dollar conglomerate through a series of successful investments in real estate deals and companies both in Saudi Arabia and abroad.