Kenny G: from dinner jazz to stock trading

Best-selling musician Kenny G has found a new way to put food on his table – by trading in stocks and shares. And he's rather good at it, he tells David Randall
Click to follow
The Independent Online

Kenny G, who once played at President Bill Clinton's inaugural ball, wakes up every morning to Starbucks. The saxophonist doesn't drink coffee. Instead, the man whose real name is Kenny Gorelick, obsessively checks the company's stock price.

Gorelick was one of the first investors in the Seattle-based chain. He was introduced to Starbucks chief Howard Schultz through an uncle, before the company went public, and soon bought a stake. Shares are up more than 12,000 per cent since beginning public trade.

That success helped spark a stock-trading habit that consumes his attention as his music earning potential is eaten away by digital music, which pays less than physical album sales, and online piracy. These days, Gorelick spends his mornings in front of his computer screen, trading blocs of shares of the approximately 30 companies in his portfolio. Over the past decade, he has earned about as much money from stock trading as from music, he says.

"Most people in the music business don't make as much money as we used to," says Gorelick, who topped the contemporary jazz sales charts for several years running in the 1990s and whose 2010 album Heart and Soul cracked jazz's top 10. "You have your 1 per cent of Beyoncé and U2, who are playing stadiums, who are going to make tons of money. I'm going to put myself in the normal category of a music person who has been successful."

Gorelick, who holds a degree in accounting from the University of Washington, keeps his assets in two main accounts: one for his own trading and one that is overseen by Todd Morgan, a founder of Los Angeles-based firm Bel Air Investment Advisors. Morgan says that it is common for his clients, all of whom must meet the firm's $20m (£12.3m) minimum in investable assets, to keep a portion of their portfolios for stock trading.

Wealthy investors with more than $1m in their accounts are unusual in their affection for trading individual shares, with 30 per cent or more of portfolios invested in single company positions, according to a study from E*Trade Financial. Smaller accounts, meanwhile, tend to keep roughly 20 per cent of total portfolios in individual stocks, a figure that has dropped since 2008 with the rise of index funds and low-cost exchanged traded funds that track the performance of the broad market.

Picking stock winners is not easy. Only 30 per cent of professional fund managers outperformed the benchmark Standard & Poor's 500 index over the past decade, according to data from Lipper, a Thomson Reuters company.

Gorelick has been more fortunate than other musicians when it comes to the income he's lost to streaming and digital downloads. His 2010 album, Heart and Soul, sold nearly 12,000 copies in its first week, with an unusually high 86 per cent of sales coming in higher-priced compact discs, according to figures from Nielsen SoundScan. His next solo album is due later this year.

As far as stock performance goes, "I have a good batting average, but I'm definitely not perfect," Gorelick says. He asks people he considers smart about what is happening in their fields. If he comes across a company that looks promising, he watches it for a while, reading coverage of the companies and doing other research, and then might buy on a dip.

One of his biggest recent winners was a stake in Potash Corp of Saskatchewan Inc, one of the world's largest fertiliser exporters. He heard about the company from a friend in Canada who was a successful stock picker – "that made his advice easy to follow," Gorelick says.

He watched the stock for two months, and bought significantly when it dipped one day to around a split-adjusted $30 per share in 2010. The shares shot up to $62 per share the following year as the company fought off takeover bids. Gorelick sold on the way back down, at $60 and below. "I made a lot of money on that stock," Gorelick says.

Nearly the opposite happened with his stake in biotech Dendreon Corp, recommended by a friend. Gorelick began buying shares around $35 in early 2011. Not long afterward, the company announced that sales of its prostate cancer vaccine Provenge were not meeting expectations. Gorelick sold for less than $5 a share. It now trades at less than $2 per share. "I don't listen to tips from friends as much anymore," Gorelick jokes.

Gorelick still has "a fair amount" of his original shares in Starbucks Corp and watches the stock price every day. Yet he tries to keep himself from getting caught up in every change of the ticker.

"I can get emotional in my music, and try to make more sense when it comes to trading," he says.

Comments