Warren Buffett is the most respected and successful investor in history. Buffett has been called �The Oracle of Omaha� for his impressive investing prowess. As of September 2007, he was the third richest person in the world. Buffett studied under the legendary Benjamin Graham at Columbia University. Graham had a major impact on Buffett�s life and investment strategies. Buffett is Chairman of the miraculous Berkshire Hathaway, which he built from a textile company into a major corporation with a market cap in excess of $200 billion. Under Buffett�s leadership, Berkshire shares averaged a 21.4% compounded annual gain in per-share book value from 1965-2006.
Warren Buffett follows a value investing strategy that is an adaptation of Benjamin Graham�s approach. His investment strategy of discipline, patience and value consistently outperforms the market and his moves are followed by thousands of investors worldwide. Buffett seeks to acquire great companies trading at a discount to their intrinsic value, and to hold them for a long time. He will only invest in businesses that he understands, and always insists on a margin of safety. Regarding the types of businesses Berkshire likes to purchase, Buffett stated, �We want businesses to be one (a) that we can understand; (b) with favorable long-term prospects; (c) operated by honest and competent people; and (d) available at a very attractive price.�
Seth Klarman is a value investor and Portfolio Manager of the investment partnership The Baupost Group. Founded in 1983, The Baupost Group now manages $7 billion, and has averaged returns of nearly 20% annually since their inception. Seth Klarman is the author of the book �Margin of Safety?,� which sells for over $1000. Mr. Klarman attended Cornell University where he received a degree in economics, and later attended Harvard University where he earned an M.B.A.
Seth Klarman invests in a wide array of investments ranging from fairly traditional value stocks to more esoteric investments like distressed debt, liquidations, and foreign equities or bonds. Klarman doesn’t mind “doing nothing” on occasion. He is completely unperturbed by the idea of sitting on the sidelines holding cash whenever investment opportunities are scarce. In fact, in 2005 and 2006, nearly half of his portfolio was held in cash. Investing, he cautions, is more than just producing absolute returns. Too often investors focus on that one easy number “return” and ignore the risks incurred to generate that number.
George Soros is known for the unmatched success of his Quantum Fund. A hedge fund guru, he is recognized for having the best performance record of any investment fund in the world over its 26-year history. A mere $1000 invested in 1969 when Soros established the Quantum Fund would have been worth $4 million by the year 2000. During that time he achieved a cumulative 32% annual return.
His basic theory of investing is that financial markets are chaotic. The prices of stocks, bonds and currencies depend on the human beings who buy and sell them, and those traders often act out of highly emotional reactions rather than coolly logical calculations. Opportunities can be found by carefully studying the value and the market prices of assets. He focuses on a theory of �reflexivity,� which is based on the premise that individual investor biases affect market transactions and the economy.
Martin Whitman is Founder and Portfolio Manager of the Third Avenue Value Fund (TAVFX). From inception in November 1990 through October 2007, his fund has returned an annualized average of 16.83%. In the same period, the S&P 500 index returned an average 12.33% annually.
Whitman is a “buy and hold” value investor. He buys stock in companies when he thinks that the company has strong finances, competent management, and the business is understandable. Also the company�s stock must be cheap, meaning it trades at a significant discount to intrinsic value. The market price must lie substantially below a conservative valuation of the business as a private entity, or as a takeover candidate. He generally sells an investment only when there has been a fundamental change in the business or capital structure of the company that significantly affects the investment’s inherent value, or when he believes that the market value of an investment is overpriced relative to its intrinsic value.
Prem Watsa was born in 1950 in Hyderabad, India and is the founder, chairman, and chief executive of Fairfax Financial Holdings, based in Toronto, Ontario. He has been called the “Canadian Warren Buffett” by some during successful periods of investing in the past. He is a Chartered Financial Analyst, a graduate of the Indian Institute of Technology with a degree in Chemical Engineering and a holder of an MBA from the Richard Ivey School of Business of the University of Western Ontario.
Carl Icahn is an activist investor. He takes minority stakes in public companies and typically pushes for change. He invests with three investment vehicles: the 7 billion hedge fund, Icahn Partners, American Real Estate Partners (AREP), a public traded private equity firm, and ICAHN MANAGEMENT LP, a $2 billion hedge fund.
Mr. Icahn buys beaten-down assets that nobody else wants, usually out of bankruptcy, then fix them up and sell them when they are back in favor. Regarding to his style, explains Icahn: The consensus thinking is generally wrong. If you go with a trend, the momentum always falls apart on you. So I buy companies that are not glamorous and usually out of favor. It is even better if the whole industry is out of favor.
John Rogers is the Founder of Ariel Capital Management, LLC, which he started in 1983. As of 2008, the firm had over $15.5 billion in assets under management. John manages Ariel’s small and mid-cap institutional portfolios as well as the Ariel Fund (ARGFX) and Ariel Appreciation Fund (CAAPX). He is also a long-term Forbes columnist writing a column called �Patient Investor.� Since inception in November 1986, his Ariel Fund has averaged 12.95% annually through November 2007.
Rogers has concentrated his investment selection on small and medium-sized companies whose share prices are undervalued. He believes that patience, independent thinking, and a long-term outlook are essential to achieving good returns. His fund seeks to purchase companies whose prospects include high barriers to entry, sustainable competitive advantages, and predictable fundamentals that allow for double digit cash earnings growth. Rogers purchases companies when they are trading at a low valuation relative to potential earnings (p/e less than 13x forward cash earnings) and/or a low valuation relative to intrinsic worth (40% discount to private market value�PMV).