Four billionaires, four investment styles, and one incredible result
From Dr. Richard Smith, founder, TradeStops:
Last week we showed you the results of one of our first billionaire portfolios. In just 8 months’ time, we were able to double the performance of the S&P 500.
Our long-term backtesting using the billionaires’ stocks as the basis for our portfolios shows a similar result, outperforming the S&P 500 by more than 3-1.
Today, I want to show you some more research that we did when we limited the number of billionaires to just four. Not just any four billionaires, but four of the most successful investors in modern history.
The billionaires we included in our study were Warren Buffett, Carl Icahn, Seth Klarman, and David Einhorn.
These billionaires have their own methodologies for finding stocks. They all consider themselves to be “value” investors, but what they look for is completely different.
- Warren Buffett looks for “intrinsic value” – the discounted value of the cash that can be pulled out of the company over the remaining life of the company.
- Carl Icahn is an “activist” investor – he describes himself as a “contrarian” investor looking for companies with prices that reflect a poor P/E ratio or trading underneath book value.
- Seth Klarman is a “risk-averse value investor” – he invests in heavily-concentrated stock positions as well as fixed income and real estate.
- David Einhorn uses a combination of fundamental and quantitative research – he’s best-known for shorting Lehman Brothers into the 2008 collapse.
Using the TradeStops Stock State Indicator (SSI) and Risk Rebalancer tools would have improved the performance of three out of four of these billionaires.
David Einhorn is an interesting case. As commented here, Einhorn likes to get into companies early, shortly after the IPOs, hoping for large gains as the company moves higher. This is a risky strategy.
Because these billionaires have such differing methodologies to identify and invest in stocks, we wondered what would happen if we limited our investment choices to just their four portfolios.
The results are… incredible!
In 17 years, these 4 billionaires’ stock picks with the TradeStops Pure Quant Strategy outperformed the S&P 500 by almost ten times!
Some members of my staff thought we should keep these results under wraps. This is as close to the “Holy Grail” of investing as we’ve seen.
Instead, I wanted to share this with my TradeStops members to give you another option to get the best returns possible.
We all know that what happened in the past is not what we should expect in the future. But the concept of using 4 billionaires with different perspectives is powerful. And there’s no reason to think these billionaires – Buffett, Icahn, Klarman, and Einhorn – will stop being successful.
It’s inspiring to see what is possible with discipline, patience, and a little bit of research. Especially when some of the smartest investors in the world can do the heavy lifting for us – allowing us to ride alongside them, while taking the stress out of investing with our proprietary TradeStops tools
Crux note: Richard’s TradeStops philosophy is to cut your losses and let your winners ride… And the results speak for themselves.
You can discover why one satisfied investor called TradeStops his “safety net” right here.