There’s an old saying in investing:
The biggest misses aren’t the ones you miss. They’re the ones you sell too early.
I recently went down a rabbit hole on A. Soriano Corporation (Anscor) and ICTSI and came across what may be one of the greatest “sold too early” stories in Philippine business history.
Back in 1988, Anscor acquired a 23% stake in ICTSI as a seed investor when the company was formed to participate in the privatization and operation of the Manila International Container Terminal.
I haven’t been able to determine exactly how much Anscor invested, but my estimate is around ₱150 million based on some old annual reports I’ve read. Whatever the number was, it turned out to be an extraordinary investment.
In 2006, Anscor sold approximately 23% of ICTSI to Ricky Razon for about ₱5.91 billion.
Not bad.
A roughly ₱150 million investment turned into ₱5.91 billion. That’s about a 39x return, equivalent to roughly a 22.7% annualized return over 18 years.
Most investors would happily call that the investment of a lifetime.
And yet…
Today, ICTSI has a market capitalization of approximately ₱1.963 trillion, or about US$32.55 billion.
Had Anscor simply done nothing and held onto the stake, that same 23% ownership would now be worth approximately ₱451 billion, or about US$7.49 billion.
For context, Anscor’s entire market capitalization today is about ₱42.65 billion.
In other words:
The ICTSI stake alone would be worth almost 11 times the value of Anscor today.
Isn’t that wild?
What’s fascinating is that the annual return barely changes.
Anscor earned roughly 22.7% annually from 1988 to 2006. Had they held until today, the annual return would have been around 23.5%.
The difference isn’t the annual return.
The difference is Anscor stopped compounding through ICTSI after 18 years while ICTSI itself continued compounding for another 20 years.
That’s the whole story right there.
The problem wasn’t that Anscor made a bad investment. The problem wasn’t even that they sold at a bad price. They sold a great business that kept getting better.
And that brings me to the most interesting part of this story.
Not because Anscor sold.
But because Ricky bought.
The Most Important Signal
Think about the situation in 2006. ICTSI had already appreciated massively. Anscor had already made a fortune. The Asian Financial Crisis was in the rearview mirror. And in hindsight, they sold ahead of the Global Financial Crisis of 2008, so the timing appeared quite prescient.
If your objective was to de-risk, diversify and lock in a spectacular gain after nearly two decades of compounding, it’s hard to argue that the decision was irrational.
Mission accomplished, right?
Apparently not.
Ricky wrote a ₱5.91 billion check and increased his ownership.
Today, that same stake is worth approximately ₱451 billion.
That’s:
- 76x Multiple on Invested Capital
- Roughly 23.5% annualized returns
- Over the next 20 years
Think about how remarkable that is.
Anscor compounded at roughly 22.7% annually for 18 years.
Ricky then compounded at roughly 23.5% annually for the next 20 years.
The business basically compounded at the same extraordinary rate for almost four decades.
That’s almost unheard of.
And depending on which estimate of Ricky’s net worth you use, that single purchase may account for roughly one-third of his fortune today.
One decision. One additional 23% stake. One major bet on himself. And nearly two decades later, billion dollars of incremental wealth.
It’s a good reminder that while great businesses create fortunes, sometimes a single capital allocation decision can dramatically amplify them.
Which brings me to what I think is the most important lesson in the whole story.
An astute PSE investor might have noticed the signal Ricky was sending. After all, who knew ICTSI better than Ricky Razon?
When the founder and operator of a business is willing to write a very large personal check to increase his ownership, that’s usually worth paying attention to.
Founders aren’t always right. But when exceptional operators concentrate their ownership instead of diversifying it, investors should pay attention.
Not blindly. Not because founders are infallible. But because the person who knows the business best is telling you something.
I sometimes wonder whether anyone in the market looked at that transaction back then and thought:
“Hmmm… maybe Ricky knows something I don’t.”
If they did, it may have been one of the greatest buy signals in Philippine stock market history.
To be clear, I’m not criticizing Anscor. The decision was understandable. They had lived through the Asian Financial Crisis. ICTSI had become a huge percentage of the portfolio. Crystallizing a gigantic gain probably felt prudent, disciplined and responsible.
But sometimes there’s a fine line between discipline and loss of conviction.
The temptation of realizing what appears to be a spectacular gain can make us forget the original conviction that led us to the investment in the first place.
Maybe that’s the hardest part of investing.
It isn’t identifying a winner.
It’s recognizing when you’ve found something so special that you should simply get out of the way and let time do the heavy lifting.
Looking back, ICTSI may have been one of those rare businesses.
That’s what makes this story so interesting to me.
Anscor did not miss ICTSI.
They found it. They backed it. They made a fortune on it.
They just got off the train halfway through the journey.
And Ricky?
He bought another ticket.
History suggests one of them had more conviction.
And perhaps that’s the hardest part of investing: knowing when you’ve found something special enough to stay on the train.
About the Author
Eric Manlunas is the co-Founder of Wavemaker Partners, a cross-border venture capital firm investing in Southeast Asia and the United States. He is also an active private investor. The views expressed here are his own.