Stanley Ho

Stanley Ho Hung-sun (1921-2020) was a legendary Hong Kong and Macau-based billionaire and entrepreneur, famously known as the “King of Gambling.” He almost single-handedly transformed the former Portuguese colony of Macau into the world's premier gaming destination, eclipsing Las Vegas. Ho’s company held a government-granted monopoly on Macau’s casino industry for an incredible 40 years, from 1962 to 2002. While not a value investor in the traditional sense of buying undervalued stocks, his career is a masterclass in building and defending an empire with a near-impenetrable economic moat. For ordinary investors, his story offers powerful, real-world lessons on the value of monopolies, the importance of diversification, and the immense risks associated with poor corporate governance and succession planning.

Born into a prominent Hong Kong family that fell on hard times, Ho fled to neutral Macau during World War II with just a few dollars in his pocket. Through his wits and connections, he made his first fortune smuggling goods into China. The turning point came in 1962 when he, along with a consortium of partners, won the exclusive concession for all forms of gambling in Macau. His new company, Sociedade de Turismo e Diversões de Macau (STDM), became the engine of Macau's economy. For four decades, if you placed a bet in Macau, Stanley Ho's company took a cut. This government-sanctioned monopoly provided a stable and colossal stream of cash flow, which he used to build an even larger business empire. The casino operations were later listed on the Hong Kong Stock Exchange under the name SJM Holdings.

Stanley Ho was far more than just a casino operator. He understood the power of diversification and used the profits from his gambling monopoly to build a sprawling conglomerate under his other flagship company, Shun Tak Holdings. This company controlled critical infrastructure and services that supported the casino industry and Macau's economy as a whole. His business interests included:

• Transportation: The high-speed ferry and helicopter services (TurboJET) that shuttle millions of visitors between Hong Kong and Macau.
• Hospitality: A vast portfolio of hotels, including the iconic Hotel Lisboa.
• Real Estate: Extensive property developments in Macau, Hong Kong, and mainland China.
• Finance and Retail: Stakes in various other sectors, creating a deeply integrated business ecosystem.

This strategy was brilliant: he not only owned the main attraction (the casinos) but also the essential services that brought customers to his door.

For a value investor, the holy grail is a business with a durable competitive advantage, or an “economic moat.” Stanley Ho’s 40-year gambling monopoly was arguably one of the widest moats in modern business history. It completely locked out competition, allowing his companies to generate immense profits with high predictability. However, the story also provides a lesson in what happens when a moat disappears. In 2002, the Macau government opened the market to foreign competition. Global giants like Las Vegas Sands and Wynn Resorts entered, building lavish new resorts. Suddenly, SJM Holdings had to compete on price, quality, and service, not just its exclusive license. Its market share, once 100%, began a steady decline. This illustrates a key risk for investors: even the strongest moats can be breached by regulatory changes.

Stanley Ho's personal life was as complex as his business empire, with four wives and 17 children. His final years were marred by a series of very public and messy family feuds over the control of his fortune. Different factions of the family battled for control of his key companies, creating uncertainty and damaging shareholder confidence. This serves as a critical cautionary tale for investors. When analyzing a company, especially a founder-led or family-controlled business, you must scrutinize its corporate governance and succession plan. Who will take over when the visionary leader departs? Is there a clear and stable plan, or is the company vulnerable to a destructive power struggle? A weak succession plan is a major red flag that can destroy decades of value creation.