The billionaire investor Bill Gross recently stated that his most successful investment occurred just a few years ago, whereas his most significant investing blunder traces back almost sixty years.
The Pimco cofounder and billionaire informed Themoneytimes via email this week that his smartest bet to date involved acquiring a portfolio of master limited partnership (MLP) pipeline stocks approximately three years ago.
Citing Western Midstream Partners as a prime example, he praised the “enormous” tax advantages associated with these securities.
Specifically, Gross explained that their distributions are primarily classified as return of capital rather than dividends, meaning they’re taxed only upon sale, and these deferred tax obligations can be eliminated if the assets are transferred at death with a stepped-up basis.
“Yields are double those of comparable corporate pipelines,” Gross noted. Western offers a dividend yield exceeding 8%, while Kinder Morgan yields approximately 4%.
“Rising oil prices have provided an additional tailwind,” Gross added. The U.S.-Iran tensions have driven a roughly 60% increase in crude prices since the beginning of the year, resulting in higher storage and distribution fees for energy infrastructure firms.
Greatest Misstep
Regarding his most serious investing error, Gross told Themoneytimes it was purchasing 30-year Treasurys after opening his personal account in 1969. “Lost 50% in 1 month,” he wrote.
Gross — nicknamed the “Bond King” for growing Pimco’s flagship Total Return Fund from nothing to $270 billion over nearly three decades — previously characterized the episode to Financial Advisor as an “expensive lesson about the dangers of leverage.”
He informed the publication that he purchased Treasury bonds with 10-to-1 leverage just months before joining Pimco, using $10,000 he’d earned playing blackjack.
Treasurys quickly plummeted and “wiped out half of my savings,” Gross said. He added that it was the largest percentage mistake of his career, teaching him that “gambling belongs at the casino.”
A Pipeline of Returns
Gross has been advocating for MLP pipeline stocks for several years. In October 2024, he emphasized on his blog that deferred taxes on their dividends enable investors to fully reinvest them and enhance compounding, potentially lifting an 8% return to 9% or 10% over a five-to-ten-year horizon.
He has also pointed out that mutual funds face restrictions on how much they can allocate to LP stocks, which helps support their distribution yields and keep their valuation multiples in check compared to peers.
Western’s total return, with dividends reinvested, has surpassed 200% over the past five years. Energy Transfer LP, Plains All American Pipeline LP, and MPLX, a Marathon Petroleum spinoff, have delivered comparable gains. Other peers, including Hess Midstream LP and Enterprise Products Partners LP, have shown more modest performance.