A Young Investor

To see Part 1 and Part 2 of Warren Buffett’s investment strategy, click here and here respectively.

Third Stage – (1990 – present) (60 years old – present)

By the early 1990s, Buffett and Munger faced 2 big problems:

1. Their size was too large, meaning that they now owned many companies (logistics became very difficult to organize). Thus, a KEY CONCEPT came out of this – Buffett believes in non-diversification – instead of spreading your eggs among many baskets, put all your eggs in that one basket and guard it.
2. The turbulent times means that stocks in the next 20 years won’t repeat what happened in the past 20 years.

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To see Part 1 of Warren Buffett’s investment strategy, click here.

Second Stage – Growth (1972 – 1989) (age 42 – 59)

1. It’s in this stage that Buffett discards Graham’s value investing and “evolves”.
2. In 1969, Buffett read Fisher’s book about investing not in undervalued companies, but in growth companies.
3. Basic concept: instead of before where we bought an undervalued company (e.g. 60 cents on the dollar) and spent a lot of time to fix it up, now you should buy a “growth” stock that’s overvalued, but this is good because the company’s good management ensures it will grow in the future, which means you spend less time focusing on the company.
4. This strategy was especially suited for the time (1970s and 80s), because there were no undervalued stocks left and it was the great age of growth stocks: Nifty Fifty e.g. McDonalds, Nike, Coca-Cola, etc.

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Some people classify Warren Buffett’s investment stages based upon company’s organizational forms and business models. Based upon this classification, Warren Buffett’s first stage was when he had a partnership in the 1950s and 1960s. His second stage would be in the 1980s and 1990s, where he used his company Berkshire Hathaway as his investment vehicle.

However, it would be more accurate to divide Buffett’s investment stages based on the evolution of his investment philosophy.

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Here’s an honest account from hedge fund manager Whitney Tilson as to how to get a job at a hedge fund. No BS, straight and simple.

1. “Don’t send me your resume. It’s useless. Everyone has one, and it’s basically just a scripted speech for the HR guys.” Unlike many other industries where the resume is key and it’s all scripted (e.g. you must say that you’re a team player, switching jobs to challenge yourself, etc), the hedge fund industry is brutally honest and can’t stand the standard, HR crap.

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Colm O’Shea is a highly successfull trader who has opened my eyes to a totally new way of investing/trading. Here is his investment/trading advice.

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Michael Marcus is a highly successful trader. At a young age, Michael Marcus began doing research for a brokerage firm, after which he joined Commodities Corporation to trade the company’s money. During his time at Commodities Corporation, his returns often exceeded the returns of all the other traders combined! In the space of a decade, Michael Marcus turned $30,000 into over $80 million. Here’s everything to know about him:

• Michael Marcus’ career as a trader and his investment record.
• Michael Marcus’ advice on how to trade.
• Michael Marcus’ personal life.

Paul Tudor Jones is a highly successful investor who is now a legend in the hedge fund industry. Although the following investment advice was given in the late 1980s, you’ll find that they are still applicable today because in today’s market, trend following doesn’t work (Paul is a contrarian investor, which works perfectly in secular bear markets when the market is moving inbetween a range). As a result, Paul still manages a $17 billion hedge fund, while many of his fellow investors in the 1980s who were trend followers are now history.

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Richard Dennis was a spectacularly successful commodities investor in the 1970s and 1980s until one significant loss in 1988 pretty much wiped out his entire career. Here is some of his investment advice, published in the late 1980s, around the time of his wipeout.

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Bruce Kovner is another great trend follower, having begun as a sidekick to Michael Marcus. Kovner is now a billionaire many times over, having made Caxton Associates into an $11 billion hedge fund. Here are some of his investment advice, given the late 1980s.

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Michael Marcus is a highly successful trend follower who invests in commodities. His investment record is impressive, with many years of 100%+ returns. Here is some investment advice from Michael Marcus.

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