Great money managers are like the rock stars of the financial world. The greatest investors have all made a fortune off their success and in many cases, they've helped millions of others achieve similar returns.
These investors differ widely in the strategies and philosophies they applied to their trading; some came up with new and innovative ways to analyze their investments, while others picked securites almost entirely by instinct. Where these investors don't differ is in their ability to consistently beat the market.
Ben Graham excelled as an investment manager and financial educator. He authored, among others, two investment classics of unparalleled importance. He is also universally recognized as the father of two fundamental investment disciplines – security analysis and value investing.
The essence of Graham's value investing is that any investment should be worth substantially more than an investor has to pay for it. He believed in fundamental analysis and sought out companies with strong balance sheets, or, those with little debt, above-average profit margins, and ample cash flow. (For more insight, see Introduction To Fundamental Analysis.)
One of the past century's top contrarians, it is said about John Templeton that "he bought low during the Depression, sold high during the internet boom and made more than a few good calls in between." Templeton created some of the world's largest and most successful international investment funds. He sold his Templeton funds in 1992 to the Franklin Group. In 1999, Money Magazine called him "arguably the greatest global stock picker of the century." As a naturalized British citizen living in the Bahamas, Templeton was knighted by Queen Elizabeth II for his many accomplishments.
Thomas Rowe Price, Jr.
Thomas Rowe Price, Jr. is considered to be "the father of growth investing." He spent his formative years struggling with the Depression, and the lesson he learned was not to stay out of stocks but to embrace them. Price viewed financial markets as cyclical. As a "crowd opposer," he took to investing in good companies for the long term, which was virtually unheard of at this time. His investment philosophy was that investors had to put more focus on individual stock-picking for the long term. Discipline, process, consistency, and fundamental research became the basis for his successful investing career.
Neff joined Wellington Management Co. in 1964 and stayed with the company for more than 30 years managing three of its funds. His preferred investment tactic involved investing in popular industries through indirect paths, and was considered a value investor as he focused on companies with low P/E ratios and strong dividend yields. He ran the Windsor Fund for 31 years (ending 1995), and earned a return of 13.7%, versus 10.6% for the S&P 500 over the same time span. This amounts to a gain of more than 55 times an initial investment made in 1964.
Jesse Livermore had no formal education or stock trading experience. He was a self-made man who learned from his winners as well as his losers. It was these successes and failures that helped cement trading ideas that can still be found throughout the market today. Livermore began trading for himself in his early teens, and by the age of fifteen, he had reportedly produced gains of over $1,000, which was big money in those days. Over the next several years, he made money betting against the so-called "bucket shops," which didn't handle legitimate trades – customers bet against the house on stock price movements.
Peter Lynch managed the Fidelity Magellan Fund from 1977 to 1990, during which time the fund's assets grew from $20 million to $14 billion. More importantly, Lynch reportedly beat the S&P 500 Index benchmark in 11 of those 13 years, achieving an annual average return of 29%.
Often described as a "chameleon," Peter Lynch adapted to whatever investment style worked at the time. But when it came to picking specific stocks, Peter Lynch stuck to what he knew and/or could easily understand.
George Soros was a master at translating broad-brush economic trends into highly leveraged, killer plays in bonds and currencies. As an investor, Soros was a short-term speculator, making huge bets on the directions of financial markets. In 1973, George Soros founded the hedge fund company of Soros Fund Management, which eventually evolved into the well-known and respected Quantum Fund. For almost two decades, he ran this aggressive and successful hedge fund, reportedly racking up returns in excess of 30% per year and, on two occasions, posting annual returns of more than 100%. (For related reading, see Introduction To Hedge Funds - Part 1 and Part 2.)
Referred to as the "Oracle of Omaha", Warren Buffett is viewed as one of the most successful investors in history.
Following the principles set out by Benjamin Graham, he has amassed a multibillion dollar fortune mainly through buying stocks and companies through Berkshire Hathaway. Those who invested $10,000 in Berkshire Hathaway in 1965 are above the $50 million mark today.
Buffett's investing style of discipline, patience and value has consistently outperformed the market for decades.
John (Jack) Bogle
Bogle founded the Vanguard Group mutual fund company in 1974 and made it into one of the world's largest and most respected fund sponsors. Bogle pioneered the no-load mutual fund and championed low-cost index investing for millions of investors. He created and introduced the first index fund, Vanguard 500, in 1976.
Jack Bogle's investing philosophy advocates capturing market returns by investing in broad-based index mutual funds that are characterized as no-load, low-cost, low-turnover and passively managed.
Carl Icahn is an activist, and pugnacious investor that uses ownership positions in publicly held companies to force changes to increase the value of his shares. Icahn started his corporate raiding activities in earnest in the late 1970s and hit the big leagues with his hostile takeover of TWA in 1985. Icahn is most famous for the "Icahn Lift." This is the Wall Street catchphrase that describes the upward bounce in a company's stock price that typically happens when Carl Icahn starts buying the stock of a company he believes is poorly managed.
William H. Gross
Considered the "king of bonds," Bill Gross is the world's leading bond fund manager. As the founder and managing director of the PIMCO family of bond funds, he and his team have more than $600 billion in fixed-income assets under management.
In 1996, Gross was the first portfolio manager inducted into the Fixed-Income Analyst Society Inc. hall of fame for his contributions to the advancement of bond and portfolio analysis.
For More On These Investors...
As any experienced investor knows, forging your own path and producing long-term, market-beating returns is no easy task. As such, it's easy to see how these investors carved a place for themselves in financial history. For more, see:
- The 3 Most Timeless Investment Principles
- Warren Buffett: How He Does It
- Books Worth Investing In
- World's Greatest Investors