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Stockpickr: Trade Like Prince Al-Waleed

James Altucher

Value investor Prince Al-Waleed has been called by many the "Warren Buffett of the Middle East" ever since his prescient and humongous bets in the mid-1990s on two floundering companies, Citigroup(C Quote) and AOL.

His investments occurred at all-time low points for both companies and have paid off tenfold, giving Al-Waleed a net worth estimated between $10 billion and $20 billion.

Al-Waleed began his career in real estate and construction, often brokering deals with businessmen who wanted to do transactions in Saudi Arabia. From his background in real estate comes an interest in hotels. In January 2006, he purchased Fairmont Hotel. Interestingly, Al-Waleed made his offer shortly after activist Carl Icahn agitated for change at the hotel chain. Icahn had been accumulating Fairmont and wanted the company to put itself up for sale. The prince obliged.

More recently, he has made news by offering to buy Four Seasons Hotels(FS Quote), in conjunction with Bill Gates' private equity firm Cascade Investment, for $3.8 billion in November 2006. The revenue and cash flows of Four Seasons don't justify the price at 40 times earnings, but Al-Waleed is probably making the bet that:

• Four Seasons' continued worldwide expansion will create opportunities as the dollar weakens; and
• synergies between Four Seasons and his acquisition of Fairmont can cut costs.

Other funds and analysts were making the bet on Four Seasons, including hedge fund Hayground Cove. Hayground is run by former Bear Stearns retail analyst Jason Ader. Recent positions of Ader's include Isle of Capri Casinos(ISLE Quote), where he's filed a 13D (suggesting he might have discussions with management), and troubled retail chains such as Rite Aid(RAD Quote) and RadioShack(RSH Quote).

Take a look at Hayground Cove's top positions.

On a related note, Citigroup has recently put out a report on companies that will benefit from the increasing gap between the "haves" and the "have-nots." That report includes Four Seasons, as well as companies such as Coach(COH Quote) and Sotheby's(BID Quote). For the full list, check out Citigroup's portfolio on Stockpickr.

Al-Waleed has always tried to find value in technology companies, having made a good chunk of his fortune not only from AOL but also from a well-timed investment in Apple(AAPL Quote). As I mentioned in a prior article, titled "Stockpickr: The Top Stocks at Bargain Prices," he also owns Motorola(MOT Quote).

Another large investment of his, dated from 2002 and one he's still holding on to, is Priceline(PCLN Quote).

Al-Waleed bought it at approximately $25 a share, directly from Priceline founder Jay Walker. Priceline's growth has been nothing short of phenomenal in recent years, with 250% year-over-year earnings growth in the past year. Analysts expect the company to earn $3.22 a share in 2008, up from $2.80 a share in 2007, giving it a forward P/E of just 15 and change.

Other investors in Priceline include Jeff Vinik, who took over for Peter Lynch at Fidelity Magellan in the 1990s. He then started his own fund, accumulated a net worth of several billion through investing and now primarily invests his own money. He's been loading up on tech giants such as Advanced Micro Devices(AMD Quote) and Google(GOOG Quote).

One longtime Al-Waleed stock that could come under activist attack is Saks(SKS Quote). The company has a $3 billion market cap and almost $100 million in net cash in the bank (cash of $767 million minus debt of $688 million). With EBITDA (earnings before interest, taxes, depreciation, and amortization) of $408 million, the company currently trades at just seven times. Earnings are expected to more than double in 2007, from 22 cents per share to 47 cents per share.

Another good sign is that analysts have been steadily raising their expectations. Of the 12 analysts covering the company, expectations of earnings per share have gone from 41 cents 90 days ago to 43 cents 60 days ago to 47 cents currently.

Even more interesting is who has been accumulating Saks: activist fund Barington Capital, value investor John Keeley and recently public hedge fund Fortress.

Check out Prince Al-Waleed's other holdings at Stockpickr. We regularly update the portfolio and the analysis whenever he takes additional active positions.

Stockpickr tip of the day: I'm a big fan of the recently launched TheStreet.com Ratings system and the regular articles those guys post on TheStreet.com. On Stockpickr, we also keep track of all the Ratings portfolios. You can bookmark the portfolios you're interested in if you want to receive email notifications each time they are updated.