Written by Sara Robbins, CNN
“It was a very strange thing for me,” remembers Peter Crowe. “I always was a very conservative investor.”
But five years ago, while visiting an old friend in New York, Crowe felt at a crossroads: “It was getting to a point where I didn’t know if I could afford to live in New York and had so much debt and really had no job to fall back on,” he says. “It’s sort of a once-in-a-lifetime thing, where you really have to hit the market.”
In the wake of the 2008 economic crisis, wealth was returning to the United States, and the private equity industry was entering an era of enormous investment opportunities.
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But to Crowe, no investment seemed better than that of a traditional casino — even if the odds looked daunting.
“We knew the record of casino stocks…was always higher than the average stock in the market,” says Crowe. “So by just buying the ‘underdogs’ that were the casino stocks, and also buying a select few of the ‘too big to fail’ casino stocks, we could beat the stock market.”
He hoped his strategy would pay off, but initially he was disappointed.
“I’d be buying shares of a casino stock every time they went up 25% or 30% in a day and they’d tank again in a couple of days,” he says. “I thought I had maybe a 35% chance of making any money at all.”
That all changed after a particularly massive gains in Wynn Resorts in 2015.
“We actually found it, we picked it up, we sat on it for the three weeks, and then on the Friday…we actually put it on again,” he says.
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As the stock began to rise, the other investors followed suit.
They got better. They got bigger. They got juicier. The Wynn Resorts stock went from $36 to $232 per share, a gain of 117% in a single day. It was only after the stock traded at $200 per share that Crowe realized his success was not a fluke, but an indication of bigger things to come.
Not only that, but he had a name for his method.
“The Moneymaker Effect,” a phrase he coined, would become a household phrase. It became the rallying cry of a new breed of financial influencers. This was a “broken market” for many, but Crowe knew it wasn’t a “broken business model.”
“It’s just a very strange thing, but it didn’t feel wrong or even like I was betting against a bunch of stocks,” he says. “When I looked around the room of like-minded investors at a place called Launchpad, I did my homework and I knew what I was doing. I was just becoming one of the huge winners by betting on these stocks that didn’t have, at that time, incredible potential.”
But as the number of private equity tycoons grew — from 15 in 2010 to an estimated 100 by 2013 — Crowe began to pay more attention to the industry and to his own company’s investments.
‘The Moneymaker Effect’
That’s when he knew he was onto something.
“We built a team, we built an infrastructure, and we did a lot of research,” he says. And the experience taught him a valuable lesson: “I took it [our belief] as a sign that we had a business model that was correct.”
And so he invested in the firm. His team has now “enormous research resources, sizable data analysis, and they’re the best they’ve ever been.”
For the rest of his life, that meant admitting that what they had built wasn’t necessarily the safest way to make money.