Martin Fridson is one of the best high-yield bond analysts, period. I had a chance to meet Mr. Fridson when I started a small stock club at Babson College in Wellesey, Massachusetts in the early 90s.
Two of my favorite professors at Babson are involved in this story. The first is Joel Shulman, who introduced me to Fridson. He suggested my stock group co-sponsor a talk by Fridson. Thanks to Professor Shulman, to this day, I have a signed copy of Fridson’s book Investment Illusions in my office.
In looking up that book for this post, I found Financial Statement Analysis, now in it’s fourth edition and coauthored by my other favorite professor from my time at Babson, Fernando Alvarez. Alvarez is now teaching at Columbia Business School. It’s a small world.
I thought you might like this story from Fridson’s excellent book How to be a Billionaire, in which he talks about Ross Perot and the IPO of EDS:
Ultimately, EDS came to market at a near-record 118 times earnings, or $16.50 a share. Despite Perot’s resolute drive to get top dollar for the shares he sold in the IPO, the price immediately skyrocketed in frenzied buying of high-tech stocks. Before trading closed on the day of the offering, September 12, 1968, EDS shares had risen to $23. Over the next year, EDS zoomed to $160 a share, representing a mind-boggling price-earnings earnings multiple of 500. At the peak of the go-go market in 1969, Perot’s remaining nine million EDS shares were worth $1.5 billion on paper. He had “pulled off perhaps the most spectacular personal coup in the history of American business,” in Fortune’s estimation. “Probably no other man ever made so much money so fast.”
Perot achieved a remarkable financial feat of quite a different sort when the inevitable bear market arrived in 1970. In a single day, April 22, his net worth plunged by almost half a billion dollars. Perot downplayed the significance of the event, consistent with his claim that making money had never been his goal at EDS. “The day I made Eagle Scout,” he once said, “was more important to me than the day I discovered I was a billionaire.”