Oxstones Investment Club™=We’ve collected pearls of wisdom from 10 of the finest financial minds in history.
Billionaires. A miser. A Nobel laureate. A Founding Father. We’ve rounded up the finest market minds — dead or alive — and distilled their timeless wisdom into specific suggestions for stocks, bonds and funds you can buy today. Be warned: You just might get rich.
Founder, Vanguard
Age: 85
Indispensable wisdom: It’s the fees, stupid
Nicknames: “Jack,” “Saint Jack” (used by supporters and detractors alike)
Money quote: “Don’t let the miracle of long-term compounding of returns be overwhelmed by the tyranny of long-term compounding of costs.”
Fundamentals: When he launched the first retail stock index fund, the Vanguard 500 (VFINX), in 1976, it was derided by some as “Bogle’s Folly.” But thanks to a 1996 heart transplant, Bogle has lived to see widespread acceptance of his disruptive idea — that since you can’t beat the market, low costs are all that matter. The Vanguard Group is now the world’s largest mutual fund family, with $2.6 trillion under management.
Invest like Bogle: Allocate between Vanguard Total Stock Market Index (VTI) and Vanguard Total Bond Market Index (BND) according to your age and risk tolerance. Automate your contributions, and stop thinking about stocks. You have better things to do.
Founder, Templeton Funds
1912-2008
Indispensable wisdom: Buy at the point of maximum pessimism; sell at the point of maximum optimism
Money quote: “If you buy the same securities everyone else is buying, you will have the same results as everyone else.”
Fundamentals: Templeton, a committed contrarian, believed the only way to get a bargain in the stock market was to buy when everyone else was selling: At the outbreak of World War II, when everyone else was panicking, he bought shares in every NYSE-listed company that was trading for less than $1 — and made money on nearly all of them. He was early to see the benefits of diversifying outside of America; international investing became his signature style. It worked: $10,000 invested in his flagship fund in 1954 grew into $2 million by the time Templeton retired in 1992.
Invest like Templeton: The Templeton Growth Fund (TEPLX) continues to employ Sir John’s strategies and has averaged an 18.3 percent return over the last five years.
Chairman and CEO, Berkshire Hathaway
Age: 83
Indispensable wisdom: Only invest in what you understand and at the right price
Nickname: “The Oracle of Omaha”
Bestseller: Berkshire’s annual letter to shareholders
Money quote: “Whether socks or stocks, I like buying quality merchandise when it is marked down.”
Fundamentals: Buffett’s mentor, Ben Graham, taught his disciples that you weren’t buying stocks, you were buying businesses. And sometimes “Mr. Market” was willing to sell those businesses for less than they were really worth. That was the signal to buy. Buffett has adhered to this value-investing philosophy since the 1950s, and it’s the basis of his $65 billion fortune. Some big hits: American Express (AXP),Disney (DIS), Washington Post, Capital Cities/ABC, Coca-Cola (KO) and Geico .
Invest like Buffett: Why not just buy Berkshire Hathaway (BRK.B) and have Warren invest for you? The “Baby Berkshire” B shares, at $126, are more accessible than the $190,000 A shares.
Founder, N.M. Rothschild & Sons
1777-1836
Indispensable wisdom: Information is money
Crystal ball cred: Thanks to his extensive network of carrier pigeons Rothschild knew that England had defeated France at Waterloo before anyone else in London. As other traders on the stock exchange braced for a British loss, he went long.
Fundamentals: Rothschild’s father planted the seeds for the 19th century’s greatest banking empire by stationing each of his five sons in different European cities. Nathan got London, but throughout his career he was able to profit from the insights of his brothers in Frankfurt, Paris, Naples and Vienna.
Invest like Rothschild: Tap into groups with their fingers on the pulse. Consider shares in high-yielding private equity firms like Blackstone Group (BX), Apollo Global Management (APO), Kohlberg Kravis Roberts (KKR) and Carlyle Group (CG).
Chairman, Equity Group Investments
Age: 72
Indispensable wisdom: Losers can be lucrative, too
Nickname: “The Grave Dancer”
Money quote: “Look for good companies with bad balance sheets and understand your downside.”
Fundamentals: Zell looks for down-on-their-luck companies that he can buy cheaply, and he is not afraid of debt. It’s the anti-Buffett approach: Find poorly managed companies with shoddy balance sheets and you’ll have lots of upside if they turn around. In the late 1960s Zell also pioneered the residential REIT structure, which allowed ordinary investors to buy shares in apartment buildings, bringing Wall Street-style liquidity to the real estate markets. A rare miss: His 2007 purchase of newspaper publisher Tribune Co. ended in bankruptcy.
Invest like Zell: Many of his largest holdings — Starwood Hotels (HOT), Anixter International (AXE) and Equity Residential (EQR) — are traded publicly.
Economist and political scientist
1883-1950
Indispensable wisdom: Destruction is a mechanism for progress
Bestseller: “Capitalism, Socialism and Democracy” (1942)
Money quote: “A depression is for capitalism like a good, cold shower.”
Fundamentals: Schumpeter’s great insight — which he termed “creative destruction” — was that economic innovation is fueled by entrepreneurs who discover better ways of doing things (the creative part), and their success leads to the collapse of old companies and methods (the destruction). Autos replaced horse-drawn buggies; word processors supplanted typewriters; the Internet killed print ads. The trick is to be on the right side of history.
Invest like Schumpeter: Small-cap growth funds are great places for finding Schumpeterian disruptors.Lord Abbett Developing Growth Fund (LADQX) and Wasatch World Innovators Fund (WAGTX) were up 57 percent and 34 percent, respectively, in 2013.
Manager, Fidelity Magellan Fund (1977-90)
Age: 70
Indispensable wisdom: Buy what you know
Bestseller: “One Up on Wall Street” (1989)
Money quote: “Everyone has the brainpower to follow the stock market. If you made it through fifth grade math, you can do it.”
Fundamentals: Lynch turned Fidelity’s Magellan Fund (FMAGX) into one of the world’s largest mutual funds in the 1980s by logging a compounded average annual return of 29 percent. His secret sauce: stocks with historically low price-to-earnings (P/E) multiples, avoiding companies with hyper-growth and ignoring market forecasts. His commonsense picks worked brilliantly and spawned a generation of boots-on-the-ground DIY analysts. After his amazing 13-year market-beating streak ended in 1990 with a 4.5 percent loss, he retired.
Invest like Lynch: Don’t buy Twitter (TWTR) or Amazon (AMZN), but do buy these shares suggested by AAII.com and Validea.com (both have Peter Lynch-inspired stock screens): NetApp (NTAP), Barrett Business Services (BBSI), Honda (HMC), Publix (PUSH) and Alliance FiberOptic (AFOP)
First U.S. Treasury Secretary
1755-1804
Indispensable wisdom: Sovereign strength begets financial stability
Nickname: “Little Lion”
Killer internship: Aide-de-camp for George Washington during the Revolution
Bestseller: The $10 bill
Money quote: “A nation which can prefer disgrace to danger is prepared for a master, and deserves one.”
Fundamentals: During the period when America was an emerging market, Hamilton was a tireless advocate for responsible federal finances. He knew that a strong central government was a prerequisite for robust economic growth. Lesson: Don’t buy securities in developing countries with dodgy rulers.
Invest like Hamilton: You can always be a purist and buy U.S. government bonds, but if you want to venture overseas, be sure to do plenty of homework first.
Founder, Appaloosa Management
Age: 56
Indispensible wisdom: The end is not nigh — people and markets adapt to even the worst circumstances
Influenced by: Robert Rubin
Crystal ball cred: During the panic of early 2009, bet heavily on Bank of America (BAC), Citigroup(C) and AIG (AIG)
Money quote: “I am the animal at the head of the pack. . . . I either get eaten, or I get the good grass.”
Fundamentals: Quit Goldman Sachs (GS) in 1992 to found his own hedge fund. As a distressed-bond investor he has a record of making clearheaded moves in environments of fear and misinformation. Tepper paid attention to Treasury Department statements promising to backstop the big financial firms and in the five years after the collapse of Lehman Bros. generated annualized net returns of nearly 40 percent.
Invest like Tepper: Watch the central bankers and fiscal policymakers closely. Own Google (GOOG) and Citigroup — he does.
Miser
1834-1916
Indispensable wisdom: Be opportunistic, focus on income and pinch pennies
Nickname: “The Witch of Wall Street”
Money quote: “All you have to do is buy cheap and sell dear, act with thrift and shrewdness, and be persistent.”
Fundamentals: Green inherited $5 million at age 30, and by the time she died in 1916 she had turned it into $100 million, making her the richest woman in the nation. How? One: She was unbelievably cheap, refusing to use hot water, wash her clothes or provide her son with decent medical care. Two: a flint-eyed instinct for a bargain, favoring income from distressed loans and discounted government bonds. She only bought stocks in financial panics.
Invest like Green: She endeavored to earn 6 percent annually, doubling her money every 12 years. Earning 6 percent today isn’t easy. One possibility: BlackRock’s Utility and Infrastructure Trust (BUI) has a 7 percent yield. Another: Energy Transfer Partners (ETP), an MLP yielding 6.6 percent.
http://money.msn.com/investing/the-best-investment-advice-of-all-time
Tags: Alexander Hamilton, APPALOOSA MANAGEMENT, banking empire, beat the market, ben graham, BND, contrarian view, David Tepper, financial minds, Hetty Green, international investing, Jack Bogle, Joseph Schumpeter, Nathan Mayer Rothschild, Peter Lynch, richest woman in the nation, sam zell, Sir John Templeton, stock market, value investing, vanguard, Vanguard 500, Vanguard Total Bond Market Index, Vanguard Total Stock Market Index, VFINX, VTI, Warren Buffett