Top 5 Best Investors.

Here are the top 5 Investors of all time, as picked by  Investopedia. But first, the criteria…

The list is based on 4 factors:

  1. The investor is a long term performer – that is one with a long history of beating their bench mark index(es).
  2. The investor or manager must be retired.
  3. The investor did not operate as part of a team. As John Templeton said, “I am not aware of any mutual fund that was run by a committee that ever had a superior record, except accidentally.”
  4. The investor has made some lasting contribution to the investment industry, and their own companies.

So, now that we know the criteria, here are the winners.

1. Benjamin Graham.

Graham is known as the “father of security analysis” as well as Warren Buffett’s mentor. His investment style is classified by Investopedia as “deep value investing”.

Graham’s best investment was GEICO (BRK.A), well before Warren Buffett’s Berkshire Hathaway bought the company. Graham usually sold his stock within two years after buying it, but GEICO was held for decades. Most of his investments were in low-risk arbitrage situations.

Among Benjamin Graham’s many contributions to investing are “The Intelligent Investor” (originally written in 1949 – and still relevant today!), and helping to bring about what would eventually become the CFA exam, which provides for certification of security analysts.

Graham’s estimated return is difficult to pin down since he began investing around 1914, and records and methods were not as stringent as they are today, but according to John Train in the book “Money Masters of Our Time”, Graham’s fund earned 21% annually over 20 years.

2. Sir John Templeton

Known as the “dean of global investing”, Templeton was even knighted by the Queen of England. His investment Style is “Global contrarian and value investor.” Templeton’s strategy was to buy when the investment was at the “point of maximum pessimism.” An example of this is when he bought shares of every public European company that traded for under $1 per share at the start of World War II. He made these purchases with $10,000 of borrowed money. He sold them for $40,000, four years later.

Among Templeton’s best investments are Europe at the start of WWII, Japan in 1962, Ford Motor (F) in 1978, Peru in the 1980’s and shorting tech stocks in 2000.

His major contributions are building part of Franklin Templeton Investments, and having the Oxford University’s Said Business School named after him.

Templeton’s estimated return for the Templeton Growth Fund from 1954 to 1987 is an annualized 14.5%. Not too shabby. ;-)

3. T. Rowe Price, Jr.

T. Rowe Price Jr. got his start on Wall Street in the 1920’s and in 1937, he founded his investment firm. Price is known for his saying, “What is good for the client is also good for the firm.” His style is characterized as Value and long-term growth. He invested primarily in companies he thought had good management, and were leaders in their industry. Like Warren Buffet, he preferred to hold his investments for decades.

Some of the best investments attributed to Price are: Coca-Cola (COKE), Avon Products (AVP), IBM (IBM), and Merck (MRK). He bought Merck in 1940 and reportedly made a 200% return on his money.

T. Rowe Price, Jr. was one of the 1st fund managers to charge a fee that was based on the assets he managed. This was at a time when other managers almost exclusively charged a commission. Price was also an early pioneer of growth investing, and buy and hold style with broad diversification. And, of course, he founded the company that would bear his name: T. Rowe Price (TROW).

He started his first fund in 1950, and had the best performance of that decade – almost 500% return!

4. John Neff.

John Neff joined Wellington Management Co. in 1964, where he would stay for over 30 years and manage 3 funds. He preferred to invest in popular industries, but from indirect means. For example, he would have bought shares of Home Depot (HD) or Lowes (LOW) during the recent real estate bubble, but not home builders themselves.

His style was low P/E, high-yield (value) investing, focusing on low price-earnings ratios (P/E ratios) and strong dividend yielding stocks. He sold only when the fundamentals began to deteriorate, or the price hit his target.

Neff also used what he called the “you get what you pay for” ratio, which was derived by adding the dividend yield and the growth in earnings, and dividing by the P/E. An example from Investopedia:

“if the dividend yield was 5% and the earnings growth was 10%, then he would add these two together and divide by the P/E ratio. If this was 10, then he took 15 (the “what you get” number) and divided it by 10 (the “what you pay for” number). In this example the ratio is 15/10 = 1.5. Anything over 1.0 was considered attractive.”

Neff’s best investment is considered to be his acquisition of a large stake in Ford Motor Company in 1984, and selling it 3 years later for almost 4 times as much.

His major contribution to investing is his how to book entitled “John Neff on Investing“, which is presented as a year by year account of his career.

By the time John Neff moved on from the Windsor Fund, after 31 years, his annualized return was 13.7%, versus 10.6% for the S&P 500 over the time.

5. Peter Lynch.

Lynch, a graduate of the Wharton School of Business, is famous for his “relentless pursuit.”
He would visit numerous companies to find any small difference that the market had not yet noticed. When he found such opportunity, he bought a little at a time until he eventually created what became the largest mutual fund in the world – the Fidelity Magellan Fund.

His investment style is characterized as Growth and cyclical recovery. Though he is typically considered a long term growth investor, some say he made most of his gains through value and cyclical recovery plays.

Some of what Lunch called his “ten-baggers” (A stock whose value increased 10 times its purchase price) were Dunkin’ Donuts, McDonald’s (MCD) and Pep Boys (PBY).

Among some of Peter Lynch’s contributions to the investing world are: turning Fidelity Investments into a household name, and writing the classic investment books “One Up On Wall Street : How To Use What You Already Know To Make Money In The Market” and “Beating the Street“.

Perhaps the most significant trait that these men have in common is that each took an unconventional approach instead of following the herd.

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