Who Are The Best Investors To Follow?

Who Are The Best Investors To Follow? Even the most experienced analysts admit that the stock market is unpredictable. It’s possible to make educated guesses in terms of whether particular companies will be successful, and sometimes investors and analysts correctly interpret signs that the market will move in a certain direction.

These predictions are typically based on historical behavior and performance, but they aren’t always accurate. There is always a chance that individual stocks and the market as a whole will move in an unexpected way. 

With that said, some investors are more skilled than others when it comes to identifying key characteristics of companies poised to deliver better-than-average shareholder returns. A select few have sharpened their skills to such an extent that they reliably beat market returns year after year. 

These experts don’t tend to keep their methods of evaluating assets to themselves, so it is possible to build a similar portfolio based on the investing principles they make public. With that in mind, perhaps the question isn’t which stock to buy – instead, it is, “Who are the best investors to follow?”

You can’t go too far wrong with these five:

Chamath Palihapitiya Zoom Out Philosophy

Chamath Palihapitiya may have gotten his financial start by helping Facebook (FB) become the world’s biggest social media platform, but his investment strategy has completely transformed since leaving Facebook in 2011. 

Palihapitiya started his own Venture Capital firm, Social Capital, which realized a gross absolute return of 997 percent from 2011 to 2019 – roughly triple the S&P 500.

Today, Social Capital is a tech holding company that focuses on startups delivering next-generation solutions for the world’s biggest problems. 

Palihapitiya may be the least secretive of the great investors of the 21st century. He has outlined his strategy in some detail and published it in a series of tweets. While there are six overall points on his list, two stand out:

First, don’t buy stock – buy companies.

Second, “zoom out” or look at the big picture and a long-term timeframe. Don’t get caught up in short-term volatility, which is reactionary and emotional. 

Follow Chamath Palihapitiya on Twitter (TWTR) for on-going insight into the short-term and long-term impact of current events on market conditions. 

Ray Dalio Net Worth Almost $20 Billion

Ray Dalio didn’t grow up with money, but he did have plenty of ambition. That, combined with his deep understanding of market behavior, gave him the tools necessary to build a fortune.

In 1975, Dalio founded hedge fund Bridgewater Associates. In the 45 years since, the firm has grown exponentially. It manages assets valued at $160 billion, and Dalio’s net worth is estimated to be around $18.7 billion. 

Dalio’s investment philosophy is far different from that of his peers. While all good investors focus on diversifying their portfolios, Dalio takes that several steps further.

Instead of the standard method of keeping a selection of low-risk/low-return investments in an otherwise high-risk portfolio, Dalio looks at negative correlation between assets.

He deliberately chooses assets that move in opposite directions as market conditions change, so that the value of his portfolio remains stable. 

Dalio named his theory of diversification the Holy Grail of investing. You can learn more about applying Dalio’s methods in his 2018 book Principles. 

Warren Buffett Big Picture Method Created Billions

Warren Buffett may go down in history as one of the most successful investors of all time. Remarkably, his secret to success isn’t complicated. Buffett focuses on undervalued companies that are growing revenues and profit margins quarter-over-quarter and year-over-year. 

The portfolio he maintains through his holding company Berkshire Hathaway (BRK.B) is fascinating, because it doesn’t show dramatic returns from startups that saw runaway success.

Buffett doesn’t try to get in on the ground floor of promising new ventures, and he rarely invests in businesses making splashy headlines as the next big thing. 

Instead, Buffett examines historical performance, and he looks at the quality of products and services. He seeks to understand what sets a company apart from its competitors, and if it appears to have an edge – along with strong financials – he might consider it a buy.

Like Chamath Palihapitiya, Buffett is a big picture guy. He isn’t interested in short-term results. He buys assets for their long-term potential, and it works – he has delivered average annual returns of approximately 20 percent since 1965.

Outside of Berkshire Hathaway’s quarterly earnings reports, the best way to follow Buffett for investment advice is through his annual letters to shareholders. These are available online as far back as 1977.  

Jeffrey Gundlach Managed Over $100 Billion

Jeffrey Gundlach is the co-founder and CEO of DoubleLine Capital, a mutual fund company that manages assets valued at more than $140 billion.

He is best known for his no-holds-barred approach to investing, which is demonstrated by his willingness to take big risks and make bold calls. When Gundlach makes a prediction, people listen – perhaps because he is one of the few willing to publicly risk being wrong. 

Gundlach has had his share of accurate predictions, though he has been incorrect on many occasions, as well. For example, he warned of the 2007 housing crash. More recently, he has discouraged followers from buying into the bond market. He has indicated that he expects deflation to be a problem.  

In the current environment, Gundlach suggests investors divide their portfolios into three parts – cash to protect against deflation, stocks to ensure returns if there is inflation, and gold to maintain long-term value. 

Joel Greenblatt: Magic Formula Investing

Joel Greenblatt founded the investment firm Gotham Capital in 1985. Today, the company is known as Gotham Asset Management, and Greenblatt remains in a leadership position as Co-Chief Investment Officer and Managing Principal. As of late 2019, Gotham Asset Management is responsible for more than $5.6 billion in assets. 

Greenblatt has published several books that outline his investment philosophy. The most well-known, The Little Book that Beats the Market, made the New York Times Bestseller List, and it remains highly-recommended reading for new investors to this day. 

The Little Book that Beats the Market described the concept of “magic formula investing”, which has some similarities to Warren Buffett’s methods. Greenblatt is focused on finding undervalued stocks from solid companies, as demonstrated by their high returns on invested capital and high earnings yields. 

Best Investors To Follow: The Bottom Line

All of these investors have been very successful, and any time devoted to a better understanding of their methods is time well-spent. However, it is neither practical nor possible to apply all five methods to a single portfolio, as elements of some investors’ strategies directly contradict other investors’ strategies.

Instead, draw your own conclusions as to which investor’s principles best match your own, then apply those principles to create your personal investment strategy. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.