What the Great Investors Can Teach You


You probably know the old saying, ‘There’s more than one way to skin a cat.’

It simply means there is more than one way to do something.

Nowhere is that truer than in the world of investing.

Making money consistently is a combination of skill, luck, daring and research. And it’s done in an ever-evolving environment of constant flux.

What’s more, the process of separating luck from skill takes years, even decades. There are even those that think the great Warren Buffett is nothing more than a statistical outlier.

Meaning he’s the lucky one out of thousands of investors that the rules of probability says must occur.

I’m not sure I believe that.

I mean I agree luck plays a part. But over time I think it’s like being at the casino. Eventually a lucky streak comes to an end. And the casino wins out in the end.

Now you’ve probably heard of Warren Buffet, George Soros and maybe even the ‘corporate raider’ Carl Icahn.

These are probably the big three of the past few decades.

And they all made money in different ways.

Buffet is the value hunter, looking to ‘buy a dollar for 50c’. He doesn’t care what the market is doing right now, as long as he gets a good business for a bargain price.

Soros on the other hand is looking for a big trend to play out. He creates grand theories around markets and human behaviour, then waits for the market to tell him the time is right to plunge in.

He made $1 billion personally in three months in 1992 by betting on the British pound going down in value.

Carl Icahn has been a Wall Street icon since the 1980s. He’s responsible for ushering in the era of corporate raiders and activist investors. Investors who challenge the management of a business, and look to unlock hidden value.

As I said, there’s many ways to skin a cat.

But you may have already heard of these legends of the market. So let’s look at another important three investors, who you’ve probably never heard of.

All are your old school rags to riches tales. And all — in the words of Sinatra — done it their way.

It’s inspirational stuff. 

Three rags to riches success stories

You’ve heard of value investing. And you’ve heard of growth investing.

Like oil and water, the two don’t mix. Or so goes the conventional thinking.

Not according to Bill Miller.

Miller believed that high growth stocks can be value stocks if they’re priced right. Like Peter Lynch, he placed great value on the PEG ratio.

This is like a traditional Price/Earnings ratio, but it also accounts for the growth rate of profits.

It’s a great tool to use when you assess a growth company.

The inefficiency Miller exploited was the failure of the market to account for the true rate of growth. A stock might look expensive right now. But if Miller knew that the growth rate was likely to be good, he still thought he could snare a bargain.

From 1991–2005 Miller beat the S&P 500 index every year. Something few other investors had done.

Morningstar.com names him Fund Manager of the decade in 1999.

And I bet you’d never heard of him, right?

Our next legend, Kirk Kerkorian, dropped out of school at age eight, and was an immigrant to the US who initially didn’t speak English.

During the Second World War he saved his pay and when hostilities ceased bought a plane — a Cessna — for $5,000.

He flew commercial flights and saved up $60,000 to buy the small Trans International Airlines in 1947.

In 1968 he sold this company for $104 million.

He then used this money to build massive resorts in Las Vegas and Hollywood, as well as buying film studio Metro-Goldwyn Mayer.

Upon his death in 2015 he was worth $4 billion. All grown from his pay as a pilot in the war.

The third investor is another rags to riches tale.

Jerry Buss worked odd jobs while at college. When he finished he and some mates put down $6,000 and borrowed $100,000 to buy a 14-unit apartment building in 1959.

That idea turned into a $350 million real estate business in 18 years.

He ended up owner of the LA Lakers basketball team.

Find your advantage

The key lesson in all of this I think is to not get bogged down in trying to copy someone else’s style or technique.

Sure, learn lessons from them. And try to find out why it worked. And if their style appeals to your personality and skill set, then even better.

But don’t think there’s only one way to create wealth. There are many.

Usually, your way will be different from someone else. Find what advantage you have, and exploit it.

Your never know, it might be right under your nose.

Ryan Dinse,
Editor, Money Morning

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

Ryan's premium publications include:

Money Morning Australia