The Great Masters of Investment

John Train wrote a fascinating book The Money Masters, first published in 1980, in which he explained the investment strategies of nine great investors: Warren Buffett, Paul Cabot, Philip Fisher, Benjamin Graham, Stanley Kroll, T Rowe Price, John Templeton, Larry Tisch and Robert Wilson.

The overwhelming response to this article prodded, in a way, John Train to describe the techniques of present day investment gurus in a complementary book The New Money Masters. This book describes the investment strategies of Jim Rogers, Michael Steinhardt, Philip Carrat, Gorge Soros, George Michaelis, John Neff, Ralph Wanger, and Peter Lynch.

From the galaxy of investments masters, surveyed so ably by John Train, four names seem to stand out for their distinctive style and exceptional long term performances: Warren Buffett, John Templeton, Peter Lynch, and George Soros.

This article seeks to provide a synoptic view of the methods and strategies followed by these investment wizards. Obviously the succinct presentations here cannot do full to their rich style and subtle techniques. The reader interested in learning more about their approaches is advised to read full length volumes dedicated to them, which have been referred to in the following pages.

In addition, it explores the approach of David Dreman, widely regarded as the ‘dean’ of contrarians, the tips given by Charles Ellis, a highly regarded investment professional, for playing what he calls the Loser’s Game, the counsel provided by John Bogle, a doyen in the world of finance, the wisdom of Swiss speculators, who have been immensely successful, as embodied in the Zurich axioms, and the strategies followed by a few Indian Investment gurus.

Warren Buffett: The Ultimate Businessman

Hailed as the world’s most successful stock market investor, Warren Buffett was ranked as the richest American in a list complied by Forbes in 1993. His track record in accumulating wealth through successful stock market investments is nonpareil. In 1956, he commenced his investment partnership with $10000; in 2005 his net worth was estimated at $44.0 billion.

Robert G Hagstrom, Jr. has described the investment strategies of warren Buffett in a fascinating book titled The Warren Buffett Way: Investment Strategies of the World’s Greatest Investor. The key tenets of the Warren Buffett way are:

1. Turn off the stock market
2. Don’t worry about the economy
3. Buy a business, not a stock
4. Manage a portfolio of business

Turn Off the Stock Market:

The stock market exhibits manic-depressive tendencies. At times it is wildly euphoic and at other times it is unduly pessimistic. Hence Buffett says that one should not take direction from the market. In fact, Buffett does not have a stock quota machine in his office. He says, after we buy a stock, consequently we would not be disturbed if markets closed for a year or two. In a similar vein he adds, we don’t need a daily quota on our well being in a 100 percent subsidiary. Why, then, should we need a quote on our 7% interest in Coke?

While the stock market should not be regarded as a preceptor, its wild gyrations present wonderful opportunities for a disciplined investor. As Buffett says, the stock market doesn’t exist. It is there only as a reference to see if anybody is offering to do anything foolish.

Don’t Worry About the Economy:

A commonly recommended approach to investments calls for forecasting the economic environment and selecting stocks that are likely to benefit most from it. Buffett however, does not subscribe to this approach for two reasons:

1. It is as difficult to predict the economy as it to forecast the stock market.
2. A strategy of selecting stocks that benefit from a particular economic environment invariably leads to speculation and excessive turnover. Instead, Buffett prefers to invest in businesses that do well irrespective of what happens to the economy.

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