Got $1,000? 3 Buffett Stocks to Buy and Hold Forever
Seeking profits? Follow one of history's most successful investors.
The greatest investors have long track records of generating market-crushing returns over their investing careers. Their successes, in turn, enrich the investors who entrust them with their money. Famous investors' uncanny ability to create wealth is what makes them famous.
Here's a closer look at some of the most well-known investors in the world.
Bill Ackman's hedge fund is Pershing Square Capital Management. In 2020, the value of Pershing Square's holdings increased by a jaw-dropping 70.2%, beating the firm's prior record of 58.1% that it set in the previous year. Ackman has a history of producing impressive returns, and one of the keys to his sustained success is his activist investing approach. Ackman purchases large stakes in public companies that he believes would be more valuable if certain operational or structural changes were made. After acquiring an influential stake, he then uses that influence to compel the company to adjust its business. Ackman sells his holdings once the company reaches his target value.
Benjamin Graham was an investing pioneer, having invented in the 1920s the concept of value investing -- an approach that prioritizes buying stocks priced below their intrinsic values. Graham wrote two of the most famous books on investing, Securities Analysis with David Dodd and The Intelligent Investor. As both a lecturer at Columbia University and a fund manager, Graham played a formative role in Warren Buffett's ascent as a value investor.
Buffett might be the most famous investor of all. Known as the "Oracle of Omaha," he worked for and learned from Graham until the value investing pioneer retired. Buffett proceeded to establish his own investing partnership to focus on buying stakes in quality companies at fair prices. In 1965, he purchased textile maker Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) and turned it into a holding company for his growing investment portfolio. Berkshire Hathaway's portfolio contains sizable stakes in many public companies across a wide range of industries. He's also made Berkshire Hathaway into an insurance, energy, and industrial powerhouse that owns some of the world's most iconic brands.
Buffett's investing approach has produced awe-inspiring investment returns over many years. Since 1965, Berkshire Hathaway has produced an average annual return of 20% -- almost double the performance of the S&P 500 (SNPINDEX: ^GSPC) during the same time period.
Jack Bogle founded the Vanguard Group in 1975. He pioneered the no-load mutual fund, which, by eliminating reliance on third-party brokerages, doesn't charge a sales commission. He also created the first low-cost index fund, called the Vanguard 500, which aimed to match the S&P 500's performance in exchange for only a minimal fee. His approach, which has only grown more popular with the rise of exchange-traded funds (or ETFs, a type of index fund), enables investors to capture returns aligned with the broader market without paying excessive fees.
David and Tom Gardner co-founded the multimedia financial services company The Motley Fool in 1993 to help people achieve financial freedom. Since launching their flagship Stock Advisor service in February 2002, the Gardner brothers have delivered to their subscribers a 565% total return through April 4, 2021 -- vastly outperforming the S&P 500's 124% gain during that time period. The Gardner brothers recommend stocks to subscribers and invest in those same stocks themselves.
Carl Icahn, like Bill Ackman, is an activist investor who acquires significant stakes in public companies in order to force changes that Icahn believes will increase shareholder value. In the late 1970s and early 1980s, Icahn developed a reputation for being a "corporate raider" -- someone who engineers hostile takeovers of companies and then slashes costs and sells assets to boost the value of the corporate raider's shares. Icahn focuses his activism on companies that he believes are undervalued due to mismanagement, and he often seeks to effect changes related to a company's leadership team and its governance.
Peter Lynch made a name for himself as an investor by managing the Fidelity Magellan Fund, a mutual fund sponsored by Fidelity Investments. Between 1977 and 1990, Lynch increased the fund's assets under management from $20 million to more than $14 billion. The Fidelity Magellan Fund outperformed the S&P 500 in 11 years of his 13-year tenure, producing an average annual return of 29%.
Lynch has authored several classic books on investing, including One Up on Wall Street, Beating the Street, and Learn to Earn (with the latter co-authored with John Rothchild). Lynch's work contains many invaluable investing tips.
Chamath Palihapitiya is a venture capitalist, engineer, and the CEO of Social Capital. Born in Sri Lanka, Palihapitiya was an early senior executive at Facebook (NASDAQ: FB) and also a non-professional investor. He left Facebook in 2011 to establish The Social+Capital Partnership (renamed as Social Capital in 2015), a venture capital fund focusing on technology companies. Palihapitiya uses the special purpose acquisition company (SPAC) structure to profit from taking companies public. Past SPAC merger targets include Richard Branson's space company Virgin Galactic (NYSE: SPCE), the online real estate company Opendoor Technologies (NASDAQ: OPEN), and the data-driven health insurance provider Clover Health (NASDAQ: CLOV). As of early 2021, Palihapitiya's 12 completed SPAC deals have increased in value by a combined 137%.
George Soros in 1973 founded the hedge fund company Soros Funds Management, which later became the Quantum Fund. He's an aggressive and highly successful hedge fund manager who consistently generates annual portfolio returns of more than 30%, with the gains for two of those years exceeding 100%. Soros nets spectacular gains by making massive directional short-term bets on currencies and securities, including stocks and bonds.
John Templeton is considered one of the best contrarian investors. During the Great Depression, he famously bought 100 shares of each company listed on the New York Stock Exchange that traded for less than $1. That simple, bold wager made him a very wealthy man. His flagship mutual fund, the Templeton Growth Fund, was founded in 1954 and produced annualized returns exceeding 15% over 38 years. He also pioneered international investing, having established some of the largest and most successful cross-border investment funds. He eventually sold his firm, Templeton Funds, to the Franklin Group, which is now Franklin Resources (NYSE: BEN).
Cathie Wood is the founder, CEO, and chief investment officer of ARK Invest, an investment management company that establishes and actively manages a portfolio of ETFs. Founded in 2014, ARK Invest had expanded its assets under management to $50 billion by early 2021. One of the firm's top ETFs, the ARK Innovation ETF (NYSE: ARKK), has produced average annualized returns of 39% from 2014 through early 2021 -- more than three times the return of the S&P 500 during that same time frame.
The above list is not exhaustive. Many other investors have earned name recognition for their abilities to deliver market-beating returns year after year. For example, while Warren Buffett and John Templeton are some of the most famous value or contrarian investors, Jim Rogers, Marc Faber, and others have also earned reputations for their value investing success. Several investors, including Thomas Rowe Price Jr. and Phillip Fisher, have made names for themselves by successfully investing in growth stocks, and both are considered as "fathers" of growth investing.
Not all famous investors earned their public images by creating wealth via the stock market. Billionaire real estate investors Sam Zell, Stephen Ross, and even former President Donald Trump are famous for their ability to profit from real estate investments, while Bill Gross -- dubbed the "king of bonds" -- eschewed the stock market in favor of bond investing.
Stating the obvious, almost all of the famous investors on this list are white men. While that extreme skew is a systemic and persistent flaw, investors such as Cathie Wood and Chamath Palihapitiya are helping to change the face of the investment industry. As they demonstrate, you don’t have to be a white man to be a highly successful investor.
Another characteristic that famous investors share is that they focus on and master one specific approach to investing. Whether it's identifying value stocks or growth stocks or pushing for change as an influential activist, these famous investors earn outsized returns by leveraging their deep investing knowledge and staying focused on the strategies that for them are consistently profitable.
Seeking profits? Follow one of history's most successful investors.
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