America’s top investors have generated double-digit returns for years, sometimes decades. Following these top investors is a great strategy for two reasons. First, you can learn how these investors think and act, which can potentially increase your own financial IQ. Second, their investments can provide you with attractive ideas that you can invest in as well.
From longtime titans like Carl Icahn (pictured above) to current superstars like Bill Ackman, here are seven of America’s most famous investors and what you could learn from them.
1. Warren Buffett
As one of the richest investors in the world, Warren Buffett needs almost no introduction. He is CEO and Chairman of Berkshire Hathaway, a $ 500 billion conglomerate that acts as the holding company for Buffett’s investments, both its wholly owned companies and its stock investments. You may recognize some of the companies – GEICO, Dairy Queen, See’s Candies – as well as some of the stocks – Wells Fargo, and Bank of America Apple, among many others.
Buffett has done fabulously as an investor, and Berkshire stock is an industry legend. A $ 1,000 investment in 1965 when Buffett took over the company would have been worth about $ 27 million in February 2020, or $ 200 or so. Buffett made such gains initially as a value investor and then moved on to more of a growth investor. He is known for his long-term buy-and-hold style and has said his preferred holding period is forever.
Buffett is known as the “Oracle of Omaha” for this feat and his folk manner – which belies a razor-sharp business acumen. Berkshire’s annual meeting in Omaha is attended by tens of thousands of shareholders and is sometimes referred to as the “Woodstock of Capitalism.”
2. Charlie Munger
Charlie Munger is perhaps best known as a longtime business associate of Warren Buffett, who assumed the title of vice chairman of Berkshire Hathaway in 1978. Although known as Buffett’s right-hand man, he had a successful career as an investor prior to joining. the Omaha conglomerate and also has many years of practice as a lawyer.
He is known at Berkshire’s annual meetings for providing two types of answers to shareholders’ questions. First, Munger could offer bitter wisdom about how to be successful in the world. For example, he might suggest that you are more likely to be happy if you keep your expectations low, or that if you are jealous of others and feel sorry for yourself, you are sabotaging yourself. He is quick to call such strategies of self-sabotage stupid. Second, after a thorough response from Buffett to a shareholder question, he can make a curt “no comment”.
Munger is famous among investors for its intellectual approach for investing and living, the mantra is often quoted as “turn back, always turn back”. With this, Munger is suggesting that investors try to avoid the things they know will fail rather than just trying to find the practices that will lead to success. By avoiding the surefire failures, investors have more chances of being successful.
3. Peter Lynch
Peter Lynch ran one of the most famous mutual fund achievements of all time – Fidelity’s Magellan Fund – and it had a really good return. During his tenure from 1977 to 1990, Lynch achieved an average annual return of 29.2 percent for those investors who stuck with it. Unfortunately, many don’t. And that’s one of the most important lessons Lynch had to teach investors: money chases the hot funds year after year, so it can easily miss a rebound in a fund managed by a good manager.
Lynch has written two classic investment books – “One Up on Wall Street” (1989) and “Beating the Street” (1994) – and he is perhaps best known for his investing common sense. For example, one of Lynch’s best-known pieces of advice is “buy what you know”. What he means by this is that you should see what types of goods and services are becoming popular with your friends and family, as this could indicate a new business emerging.
4. Bill Ackman
Bill Ackman heads Pershing Square Capital Management and is one of the high profile investors of the past decade. He’s made a number of big bets and he’s not afraid to hit the media to get them out. One of Ackman’s first wins was his bet against mortgage insurer MBIA, which paid off during the financial crisis. He cleaned up at shopping mall operator General Growth Properties and real estate company Howard Hughes Corporation, where he is chairman of the board.
But while he’s known for such achievements, he’s also seen a few falls, including high-profile bets on a reversal at JC Penney and a Short position on Herbalife. His position at Herbalife would benefit if the stock fell significantly, or, as he claimed, the company was under a Ponzi scheme. In a tense confrontation with Carl Icahn (next on the list), Ackman made his case against the stock, which ended up spectacularly wrong, losing nearly a billion dollars. After proving otherwise, Ackman went on to show that even the great make mistakes.
5. Carl Icahn
Carl Icahn is as tough as investors, and this former Princeton philosophy student is known as one of the original corporate robbers of the 1980s. These investors used techniques like Greenmail (asking a company to buy back its shares at a high price from the investor in return for the investor leaving the company alone) to wrest profit from the company. While Icahn has been avoiding such techniques for many years, he has been no less active in buying up companies, selling divisions, and forcing other companies to sell. He is one of the most successful activist investors in the world and is known for his tough negotiating style.
Icahn famously took the other side of Ackman’s deal at Herbalife, calling him a “liar” and “crybaby” on national television, and eventually made a fortune by buying up a large portion of the stock and holding it for years. However, he took a bath at Hertz car rental and essentially wiped out a $ 1.8 billion investment there when the company announced bankruptcy in 2020.
6. Ben Graham
Ben Graham is considered to be the father of value investing, an approach that seeks to buy $ 1 worth of value for $ 0.75 or even less. He brought intellectual rigor to investment practice and is also known as an early instructor to Warren Buffett. Its investment principles are set out in the weighty volumes “Security Analysis” (co-authored by David Dodd) and “The Intelligent Investor”, which is one of the most popular investment books because of its clarity and straightforwardness.
In the latter book, Graham introduces the character of Mr. Market, a metaphor for how the market works and an attempt to show how manic the market can be. One day Mr. Market may be ready to sell you a stock at a low price, but some days he decides to ask a high price and you may never know which Mr. Market will show up. Graham is associated with “cigar butt investing,” an approach where a stock still has a touch of value but few drawbacks to buying.
7. George Soros
George Soros is one of the most famous investors in the world, but he’s more of a trader or speculator than an investor. That is, he takes positions (often hundreds of them) and seeks profit when a stock moves. He’s usually not an investor who buys to hold on like Warren Buffett often does. Instead, Soros will be negotiating and negotiating a position, and he’s not afraid to buy himself back into a position he just sold if new information leads him to believe it will go higher.
Soros is known as “The Man Who Broke the Bank of England” for his massive 1992 wager on the British pound sterling, which allegedly earned him a profit of $ 1 billion. Soros is also known for applying the principle of reflexivity to financial markets. A central thought here is that markets can achieve their own successes or failures solely through the belief of investors. So if investors continue to fund a money-losing company during troubled times, they can eventually make it a success. Likewise, if they withhold money from a troubled company, they can cause it to fail. So, regardless of reality, belief can become a self-fulfilling prophecy for the company.
Following the lives of famous investors is a great way to share their knowledge and decades of experience so you can potentially skip some of the most difficult and expensive investing hours. Why bear this expense when you can learn from it?