Why not just follow the winners?

I'm sure it's been thought of before, but why can't one just adopt a strategy of investing in whatever the successful people are investing in? Why not just buy whatever Warren Buffet has a stake in?

I'm not sure how one finds out what companies the rich invest in, but it was my random thought of the day.

Tyler Durden said:

I'm sure it's been thought of before, but why can't one just adopt a strategy of investing in whatever the successful people are investing in? Why not just buy whatever Warren Buffet has a stake in?

I'm not sure how one finds out what companies the rich invest in, but it was my random thought of the day.

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Just lately, Warren Buffett has so much capital to allocate, that he buys whole companies.
When he got interested in Energy, he bought Burlington Northern (a whole rail network)
So to follow his lead you would need to buy something similar.

burglar said:

Just lately, Warren Buffett has so much capital to allocate, that he buys whole companies.
When he got interested in Energy, he bought Burlington Northern (a whole rail network)
So to follow his lead you would need to buy something similar.

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Perhaps he meant as in Coca Cola and Wells Fargo or whatever else Buffett has shares in, but doesn't own outright.

Buffet has a horizon of around 10 years. If you're willing to sit on shares for that long, many people bail out if it rallies a decent gain. I'm sure some of Buffet's investments he plans are for beyond his lifetime.

If you can find short term trades of the super rich in realtime, I'm sure you SHOULD theoratically do well. I would be interested if you can find such signals.

Why not indeed! I regularly read the filings for all the investment managers and investment companies I admire. There are sites which specialise in tracking investment gurus, e.g. http://www.gurufocus.com/stockpicks.php

In Australia I follow the LICs monthly reports and filings of fund mangers I like. It's easy to do.

There is of course several catches.
You only find out after they buy.
They only disclose public company purchases and in Australia only when they reach the 5% threshold.
People like Buffett also get opportunities you or I don't. Like his Goldman Sachs and GE stock preferreds.

Gurus are a great source of investment ideas. It's then up to you to do the hard work.

Tyler Durden said:

I'm sure it's been thought of before, but why can't one just adopt a strategy of investing in whatever the successful people are investing in? Why not just buy whatever Warren Buffet has a stake in?

I'm not sure how one finds out what companies the rich invest in, but it was my random thought of the day.

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Actually my currently best performing stock was bought in this manner. Of course, Buffet has a different situation to most people - he is managing an epic wad of assets, so he has to focus on large-cap shares. For the smaller investor, more returns are to be offered by small caps. Buffet is at the pinnacle of 'diminishing marginal returns' if you will.

Buffet holds PLA (asx listed) via his webs and means.

just thought i would share that out of the kindness of my heart.

nunthewiser said:

Buffet holds PLA (asx listed) via his webs and means.

just thought i would share that out of the kindness of my heart.

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Think you meant soros - Quantum Partners.

though he has been selling recently - reduce from 8% to 6%

Found this;

skyQuake said:

Think you meant soros - Quantum Partners.

though he has been selling recently - reduce from 8% to 6%

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hahahahah

yep.

geez i shouldnt post late at night........

cheers

I never buy winners. I often hold winners but only if they continue to win. Winners usually have most of the value of winning already priced in.

I try and pick a stock that is manouvering into a winning position. This allows me to get in "cheap" and make the real profit. Most times it works. Sometimes very quickly, sometimes it takes time and sometimes it fails but overall it works a treat.

Some examples recently;

LYC. Bought when financing collapsed but with cash on hand, a good project and sound fundamentals. Bought a swag at 10c, now over $2 and still plenty of upside.

CER. Bought as low as 2.6c when the bottom fell out of their world. Dragged down by big brother CNP but trading profitably with valuable assets.

ADI. Bought as low as 5c when they were having problems getting at the oil that we knew was there. Taken over by AWE for 42c. Put some of the funds into AUT and EKA (partners in the oil field) and they have continued to rocket.

SDL. Bought in at 10c after the tragic plane crash that killed all the senior execs. Decided the the company itself wasnt lost still fundamentally almost the same as before. Now around 50c.

NTU. When they were short of funds and a Chinese takeover looked on the cards and realising the same thing had happened to Lynas and they were similar businesses it appeared that they could follow the path of Lynas. Average buy in price 14.8c. todays price 67c.

EDE. A work in progress (as are all the above). Bought in most at around 5c. Traded for "freebies" Holding for the future. Currently showing a reasonable profit.

CFE. At times the cash on hand and receivable has exceeded the MC. Has assets for sale worth multiples the MC. Hold these at good prices. Have had some dividends and capital return. CFE has had a share buyback that has also added value.Accumulated when the market in general had thought CFE had lost its way.

BUL. Could be considered a failure as it is behind the eight ball right now. I'm not writing it off as it still has great possibilities IMHO.

TXN. Showing a reasonable return even though not held for long and with potential for good early returns when they prove up what is almost certainly there.

Failures to date could be LKO and MHL. Traded them for freebies on the way down so not much to lose and, as they say "you never know".

Still holding a few like TAS that are still a real spec. But potentially sound in that they are a major holder of FIS and EDE, as well as having showed some reasonable drilling results.

So I dont follow winners to enter. I follow the ones the market has down as losers and try and find some that I believe the market has judged wrongly.

Tyler Durden said:

I'm sure it's been thought of before, but why can't one just adopt a strategy of investing in whatever the successful people are investing in? Why not just buy whatever Warren Buffet has a stake in?

I'm not sure how one finds out what companies the rich invest in, but it was my random thought of the day.

Click to expand...

Because you have to buy the winner at a price that makes sense when compared to the earnings that are likly to be generated over time.

For example if buffett bought coke for $10 it may be a wonderful investment over time, How ever if you heard about thhis and ran out and paid $50 / share it may well turn out to be a terrible investment.

Yes you both own coke and it's a winning company but the fact buffett bought it at $10 / share means he is getting 15% return through dividends and may triple his money from capital growth when it hits $30.

You buying at $50 though may see you only earning only 3% in dividends and losing 40% in capital lose when it sinks back to $30.

Tysonboss1 said:

Because you have to buy the winner at a price that makes sense when compared to the earnings that are likly to be generated over time.

For example if buffett bought coke for $10 it may be a wonderful investment over time, How ever if you heard about thhis and ran out and paid $50 / share it may well turn out to be a terrible investment.

Yes you both own coke and it's a winning company but the fact buffett bought it at $10 / share means he is getting 15% return through dividends and may triple his money from capital growth when it hits $30.

You buying at $50 though may see you only earning only 3% in dividends and losing 40% in capital lose when it sinks back to $30.

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But why can't I just buy it immediately after him for $10 or close to that?

Tyler Durden said:

But why can't I just buy it immediately after him for $10 or close to that?

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Why aren't there hundreds and thousands of Warren Buffet follower billionaires in the world? All it would take is to replicate every financial transaction he makes.

Tyler Durden said:

But why can't I just buy it immediately after him for $10 or close to that?

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KO Coca Cola has not been close to $10 since 1990
But I like your thinking!

http://au.finance.yahoo.com/echarts...osshair=on;ohlcvalues=0;logscale=off;source=;

You could maybe follow someone like Kerry Stokes.

This from Mike Mangan

"If we go back 10 months, Stokes was in the midst of yet another related party transaction. He was effectively buying Seven Media as he swapped his 100% holding in the earthmoving equipment dealership WesTrac for more shares in his minority-owned Seven.

At the time Stokes was effectively buying Seven Group Holdings, the independent expert valued Seven Media at $2.9–3.3 billion. But now when Stokes is effectively selling Seven Media – less than a year later – the value of the same assets is 55% higher at $4.6–5.1 billion."

Not very good for seven shareholders IMO.

No comparison to Kerry Stokes but if you go back a few years and followed the winners you would probably be following Mr Bond and Mr Skase for a while.

Instead of following the winners, you can invest with them. For example buy Berkshire Hathaway shares. The symbol is BRKA, then you are investing with Buffett.

If you had bought BRKA shares 13 years ago in 98, you could have paid $80,000/share. The price is now ~$130,000/share, you have done well. As it pays no dividends your return is currently ~3.9%/annum. Of course buying at different times would have produced different results.

Of more serious interest is Buffetts age. He will be 81 this year (born 30/8/1930). In the US ~40% of the population 85+ has some form of dementia, are you betting that Buffett will be in the 60% group that does not have dementia in a few years time?

brty

brty said:

If you had bought BRKA shares 13 years ago in 98, you could have paid $80,000/share. The price is now ~$130,000/share, you have done well. As it pays no dividends your return is currently ~3.9%/annum. Of course buying at different times would have produced different results.

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3.9%PA is doing well?