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Should Investors Ignore Billionaire Fund Managers?

By David Hanson and Matt Koppenheffer - Apr 21, 2013 at 6:00AM

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Are these wealthy fund manager debates something to pay attention to, or are they just noise?

In this video, Motley Fool analysts Matt Koppenheffer and David Hanson talk about some recent investing decisions made by billionaire fund managers and what individual stock investors can take away from them.

Recently, Bruce Berkowitz of the Fairholme Fund got bullish on financial stocks right around the same time that John Paulson got bearish and sold positions in Citigroup (C 7.16%), Bank of America(BAC 2.38%) and JPMorgan Chase (JPM 2.39%).

What should investors make of this?

Most of the time, investors are best served by ignoring what fund managers are doing, David says. Selling financial stocks may not mean that they don't like the stocks, but that they see opportunities they like better.

But some fund managers tend to buy stocks for the long haul, and keeping watch on their decisions could benefit investors, David says.

Matt cautions against hero worship of big fund managers. Some of these managers, like Paulson, strike it big with one call and then find legions of fans following their next moves. It's easy to be led astray, Matt says.

Follow their moves for ideas, Matt says, but don't follow them blindly.

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Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$35.64 (2.38%) $0.83
Citigroup Inc. Stock Quote
Citigroup Inc.
C
$50.86 (7.16%) $3.40
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$121.09 (2.39%) $2.83

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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