Karen Doyle
4 min read
Warren Buffett made headlines recently when he announced he will step down from his role as Chair of the Board of Berkshire Hathaway. The legendary investor is well known for bringing his successful style to the conglomerate and making himself — and a lot of other shareholders– exceedingly rich.
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But Buffett is not the only investor who subscribes to the investment theories that made him rich.
Here are five investors who invest like Warren Buffett and what you can learn from them.
Benjamin Graham was the original value investor, and he taught Buffett. Graham is considered to be the pioneer of modern securities analysis and made a fortune buying companies that were undervalued and holding them until the market caught up. Graham espoused the wisdom of technical analysis, and famously said, “To the extent that Wall Street gets away from book value, it is headed into potentially. Dangerous areas of thinking. It then introduces factors — chiefly the notion of increasing future earnings — which are very difficult to measure and which therefore may be badly measured.”
While you obviously cannot watch Graham invest today, as he died in 1976, his book, “The Intelligent Investor,” is required reading for any aspiring value investor.
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Peter Lynch managed the Fidelity Magellan mutual fund from 1997 to 1990, averaging a 29.2% annual return over that time.
Lynch says the biggest mistake small investors make is that they cannot explain why they own a particular stock. In an address to the National Press Club in 1994, Lynch said, “The single most important thing to me in the stock market for anyone is to know what you own. I’m amazed how many people own stocks; they would not be able to tell you why they own it. They couldn’t say in a minute or less why they own it. Actually, if you really press them, they’ll say, ‘the reason is own this is the sucker is going up.'”
This philosophy mirrors one of Buffett’s most famous investing truisms, “buy what you know.”
Joel Greenblatt is managing partner and co-chief investment officer of Gotham Asset Management and a former professor at Columbia Business School, where he taught value investing.
In his book “The Little Book That Beats the Market,” Greenblatt outlines his stock-picking methodology. He looks at a company’s return on invested capital, or ROIC, to determine whether or not the company is efficiently generating earnings from its invested capital. He also looks at earnings yield, which is the amount of earnings generated for each dollar invested in the stock (so, the inverse of the P/E ratio).
