These Famous Smart Investors are some of the greatest investors in the world. These are investors that have helped shaped the world of investing analysis.
Famous Quotes
1. “The first rule is not to lose. The second rule is not to forget the first rule.”
2. “If past history was all there was to the game, the richest people would be librarians.”
3. “Risk comes from not knowing what you’re doing.”
4. “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
Backround
Warren Buffet is know as “The Oracle of Omaha”. Warren Buffet was born in Omaha, Nebraska in 1930. Warren Buffet is one of the very few billionaires who has amassed wealth solely through investing in stocks. Buffet’s Berkshire Hathaway investment company has seen outstanding returns over the years. A $10,000 investment in Berkshire Hathaway in 1965 would be worth 50 million dollars today. This has made Buffet the second richest man in the world at a net worth of over $36 billion dollars.
Investment Style
Buffet’s number one goal for investing is to NEVER LOSE ANY MONEY regardless of market conditions. He believes in buying stocks trading near their tangible asset value. He also avoids companies that have excess debt. Buffet then looks at the companies track record for ROE and tries to predict where the company is going to be 10yrs from now.
Peter Lynch
Famous Quotes
1. “Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”
2. “Go for a business that any idiot can run – because sooner or later, any idiot probably is going to run it.”
Backround
Peter Lynch is the most famous mutual fund manager. Peter Lynch was born in 1944 and started managing the Fidelity Magellan Fund in 1978. When he started, the fund had assets of 20 million dollars. When he retired in 1990, the Fidelity Fund had assts of 14 billion. Today the fund has assets of over 50 billion dollars.
Investment Style
Peter Lynch’s strategy was to adjust to whatever investment style worked at the time. He took a lot of risks over the years yet never had a losing year. The fund had a amazing average return of 29%. Lynch believed in investing in what you know and to always be fully invested.
Lynch generally looked for three qualities in a good company: profitability, price, and a good business model.
Check the key numbers.
1. If you are excited by a particular product or service, ensure that it accounts for a sufficient percentage of total company sales and that it makes a significant contribution to profits.
2. Favor companies with a strong cash position
3. Favor companies with a forward PE ratio well below their forecasted EPS growth rate
4. Avoid companies with high debt-to-equity ratios.
5. Avoid slow growers and cyclical stocks.
Benjamin Graham
Famous Quotes
1. “To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.”
2. “The one principal that applies to nearly all these so-called “technical approaches” is that one should buy because a stock or the market has gone up and one should sell because it has declined. This is the exact opposite of sound business sense everywhere else, and it is most unlikely that it can lead to lasting success in Wall Street. In our own stock-market experience and observation, extending over 50 years, we have not known a single person who has consistently or lastingly made money by thus “following the market.” We do not hesitate to declare that this approach is as fallacious as it is popular.”
Backround
Benjamin Graham is “The Father of Value Investing”. Graham founded many of the fundamental analysis and value-investing principals that are used today by fund managers and famous investors such as Peter Lynch and Warren Buffet.
Investment Style
Graham looks for what he calls a “Margin of Safety” when investing in stocks. This is defined by how much a stock is trading below its intrinsic value which is what the business would be worth if it were sold today. Graham likes large companies with strong sales since they pose less risk. He also likes companies that pay out dividends and are in good financial shape. Graham looked for companies that are trading below their historical P/E average and trading below 1.2 times book value. This investment style is hardcore value investing that has proved successful over the years.
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