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Crazy-Like-Fox Donald Sterling Makes 16,000% Profit on L.A. Clippers

(Reuters) — Donald Sterling, forced to sell his National Basketball Association team after a lifetime ban for making racist comments, is not going to be remembered as a “visionary,” “icon” or “oracle” – terms attached over the years to renowned business personalities such as Bill Gates, Steve Jobs and Warren Buffett.

But Sterling’s winning bet on the Los Angeles Clippers 33 years ago means he is in their company when it comes to blowout investment returns.

Sterling laid out about $12.5 million for the team in 1981, then a perennial basement dweller called the San Diego Clippers. On Thursday, the family trust now in control of the team agreed to sell it for $2 billion to Gates’ successor at Microsoft , Steve Ballmer, more three times its estimated value just a month ago.

That’s 160 times the amount Sterling paid for the team, or equal to a gross, pretax return of 15,900 percent. With a compound-annual return of more than 16.6 percent at that selling price, Sterling’s Clippers rank right up there with many of recent and even distant history’s famously winning bets.

Using that same chunk of money in early 1981, he could have picked up shares of Apple at a split-adjusted price of $4.27 a piece shortly after Jobs – who died in took the company public in late 1980. But even with the iPhone maker now at $633 a share, Sterling’s $12.5 million would be worth just $1.86 billion, or an annual return of 16 percent. So Sterling’s done about $144 million, or 60 basis points a year, better with the Clippers.

That said, he’d have been well advised to seek out a “young” investor working out of the offices of an obscure holding company headquartered out on the U.S. prairie. In early 1981, Sterling could have had shares of Berkshire Hathaway, whose chairman, Warren Buffett, was then 50 years old and still some years from being recognized as the “Oracle of Omaha,” for around $425 each.

Had he done so, that same $12.5 million today would be worth $5.65 billion, an annual return of 20.35 percent.

But perhaps the best bet Sterling could have made was with Bill Gates.

Microsoft was not an option in 1981, as it did not go public until 1986, at $21 a share. But had Sterling thrown in the towel on his then perennially losing team in 1986 – even at the same price he’d paid for it – his $12.5 million would now be worth $7.3 billion after nine stock splits are taken into account. And that’s not including reinvested dividends.

BETTER THAN WINE

Still, even if he missed the boat on Berkshire and Microsoft, Sterling’s pick of the Clippers beat most other investments he could have made at the time – stocks, bonds, gold, property, even wine.

For instance, he has beaten:

  • Stocks:

Since the start of 1981, the Standard & Poor’s 500 Index has risen about 1,315 percent, or 8.4 percent a year.

Including reinvested dividends, the S&P has delivered a total return of 1,509 percent, or 8.8 percent a year.

The Nasdaq Composite Index is up 1,994 percent, or 9.65 percent a year.

  • Bonds:

The Barclays U.S. Aggregate Index has risen 1,385 percent, or 8.5 percent a year.

  • Gold:

Spot gold is up 113 percent, or just 2.3 percent a year.

  • Wine:

Earlier this month, London-based Liv-ex said its Liv-ex Investables Index had gained 1,504 percent, or just under 11 percent a year, since its launch in 1988.

  • Real estate:

New York City real estate appraiser Jonathan Miller says the average Manhattan apartment has gained just 5.75 percent a year in value over the 25 years he has tracked their prices.

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