Some people think of themselves as acolytes of Warren Buffett, and some think of themselves as disciples of Benjamin Graham. Which investment guru do investors’ styles most resemble? To answer that question, Investopedia partnered with Validea, a research firm that does portfolio analysis based on the investment philosophies of famous investors.
More than 550,000 Investopedia users track a virtual portfolio of stocks using our watchlist feature. Given that watchlists are an expression of an investing philosophy (conscious or not), Investopedia’s data scientists set about comparing watchlist data from our users with the research on famous investors' styles compiled by Validea.
As of March 20, 2018, data for more than 153,000 watchlist users exhibited similarities to at least one of the famous investors analyzed by Validea, with the most number of watchlist portfolios leaning towards one guru’s investment style (based on Validea’s interpretation of that guru’s investment style).
Not Warren Buffett.
The Oracle of Omaha comes in at number three, behind John Neff and Jim O'Shaughnessy. O'Shaughnessy is Chairman, Chief Investment Officer and Portfolio Manager at O'Shaughnessy Asset Management with an investment style that is described by Validea as "Growth/Value Investment." According to Validea, this two pronged strategy favors companies with market capitalization of at least $150 million and a price-to-sales ratio below 1.5. These companies show continuous growth for the growth component of the portfolio, and they also show robust sales and attractive dividend yields to satisfy O'Shaughnessy's value criterion.
As is the case with most research, the devil is in the details. There are a few things investors should keep in mind when comparing their watchlist to the investment philosophy of a great investor.
This comparison is not just based on the exact investments held in the portfolios of these investment greats. It also extend to stocks that would be considered acceptable to their investment philosophy.
You might ask, what happens when more than one investment guru bets big on the same stock? According to Investopedia’s data scientist Claire Miller, "part of what makes this model really interesting is that the best match with a famous investor, for example Warren Buffett, is not necessarily having the stock Warren Buffett rates the highest, but the stock that he rates highly that the other investors do not also rate highly. With that method, you can often get a better match by having a rare stock in your watchlist rather than the common ones."
If you’re an existing Investopedia watchlist subscriber, scroll down on our watchlist page to find your best match. Check out the stock suggestions to further improve your likeness to a particular investor.
If you want to be like your favorite investor, be careful to follow one strategy and avoid diluting your strategy with stocks that don't fit. "One thing users should watch out for is adding stocks from many different investor styles to their watchlists," warns Miller. "This will lower their percentage match to all the styles. If users are interested in multiple styles they could make a separate watchlist for each style to keep a higher match."
And when you're ready to take the next step – to put real money into real markets – find the best brokerage to fit your investing style in Investopedia's Broker Center.