You cannot educate a savant. However, you can learn a great deal by observing visionaries at work. The following are a few investment nuggets from seven expert investors:
1. John Neff
John Neff, who managed the Windsor Fund for three decades, was the epitome of a value investor. “Ugly stocks were frequently beautiful to us,” he wrote in his book On Investing. If Windsor’s portfolio appeared appealing, we were not performing our duties.
He was content to be either grossly overweight or grossly underweight in any of the main market segments. For instance, while oil equities comprised about 12% of the Standard & Poor’s 500, his holdings fluctuated between 25% and 1%.
2. William Templeton
In 1954, Sir John Templeton established the Templeton Growth Fund, which exhibited exceptional performance for more than three decades. As a pioneer in international investing, he claimed that investing internationally afforded him more opportunities to discover deals.
Midway through the 1960s, he invested significantly in Japan before it was recognized as a global economic power. “Invest at the point of maximum pain,” he would often advise.
He cautioned against selling a stock, or even worse, an entire portfolio when the price was falling. “If you sell your investments just because of a temporary decline, you will end up making the loss permanent,” he wrote.
Additionally, Templeton emphasized the significance of humility. He declared, “An investor who has all the answers does not even comprehend all the questions.”
3. Warren Buffett
“Be fearful when others are greedy, and greedy when they are fearful.” Probably the most famous quote attributed to Warren Buffett. Buffett, the chairman of Berkshire Hathaway, is widely regarded as the greatest investor alive.
“Price is what you pay,” said Buffett. “Value is what you get.”
People who invested in the speculative favorite of 2021 may want to consider another Buffett aphorism: “The worst kind of business is one that grows quickly, requires significant capital to fuel that growth, and then earns little or no money.”
4. Mike Carret
Phil Carret was one of the mutual fund industry’s pioneers. I appreciate his caution against excessive use of borrowed funds.
“Although a bank may be willing to lend [an investor] 75% to 80% of the value of solid, marketable stocks, he would be incredibly naive to use this borrowing capacity to the fullest extent.”
In his book, The Art of Speculation, Carret recommended conducting an assessment of investments every six months. The more frequently that happens, he said, the more likely it is that an investor will “fall into the evil and usually fatal habit” of excessive trading.
5. David Dreman
David Dreman, an effective mutual fund manager in the 1980s and 1990s, contributed to the spread of value investing. He is very interested in heuristics, which are mental shortcuts that people use to arrive at conclusions when presented with insufficient or perplexing data.
The “availability” heuristic is one example. The significance of things that remain in one’s consciousness is exaggerated. This is why we believe shark attacks are a more common cause of fatalities than airplane debris falling on people.
He was also interested in how individuals derive conclusions from small samples that may be the result of random chance. “For instance, investors flock to mutual funds that have performed better over the past year or several years,” he wrote.
Yet, “financial researchers have demonstrated that the “hot” funds in one time period are frequently the funds with the worst performance in another.”
6. Peter Lynch
Peter Lynch, renowned for his success managing the Fidelity Magellan Fund, offered some of his insights in the book One Up On Wall Street.
Lynch claims that anticipating recessions has cost more money than the recessions themselves. “Of course, I would love to be forewarned before we enter a recession so that I can adjust my portfolio. However, the likelihood of me sorting it out is zero,” he wrote.
Lynch asserts that individual investors can outperform institutions due to their ability to invest in items they understand. “If you invest like an institution, you’re doomed to perform like one, which, in many cases, isn’t very well,” he wrote.
7. Martin Zweig
Marty Zweig was a hedge fund manager, newsletter columnist, and author of the book Winning on Wall Street. He stated that he seeks to outperform the market with five of every eight stock selections, which is “not a bad batting average.”
Zweig employed a multi-factor approach to stock selection. He desired strong earnings, a stock price that was reasonable in relation to the earnings growth rate, and insider buying, or at least the absence of significant insider selling.
John Neff, a value investor, managed the Windsor Fund for three decades and was known for his unconventional approach to investing. He was content with either grossly overweight or underweight stocks in various market segments. William Templeton, a pioneer in international investing, established the Templeton Growth Fund and emphasized the importance of humility.
Warren Buffett, the greatest investor, emphasized the importance of price and value. Mike Carret, a pioneer in the mutual fund industry, cautioned against excessive use of borrowed funds and recommended conducting an assessment of investments every six months.
David Dreman, a mutual fund manager in the 1980s and 1990s, contributed to the spread of value investing and was interested in heuristics, such as the “availability” heuristic. Peter Lynch, a successful Fidelity Magellan Fund manager, argued that anticipating recessions costs more money than the recession itself.
Martin Zweig, a hedge fund manager and author of Winning on Wall Street, sought to outperform the market with five out of every eight stock selections using a multi-factor approach.