May 20, 2003

Learning From the Best Investors

One of the strategies that I have learned which is a great strategy for the individual investor is to learn from the best. Notice I say "learn" and not mimic - don't copy, learn. Copying someone who is a great investor may give you some positive results at first, but copying does not ensure that you understand why you are doing what you are doing. The "why" is more important than the "what". Why you are investing in a stock or mutual fund is more important that the "what" you are investing in. If you understand the why you will make fewer errors with the what, and develop further skills as you move along.

Where do I go to find people to learn from? Primarily I look at people who are good investors, people who have track records of beating the market and building wealth over significant periods of time. People like Warren Buffet (Berkshire Hathaway), or Gerald Schwartz (Onex), or fund managers with great long term histories at creating wealth such as Johathan Wellum, Michael Lee-Chin, James Cole at AIC, to name a few. Pick people that seem to be similar to your own style or a style you are interested in, and watch what they do and why. With the vast amount of media access to fund managers nowadays, you would be surprised at how much information about fund managers is available to you. Sometimes, I will pay attention to people whose style is the absolute antithesis to mine just to see how they make money in areas I don't understand like, precious metals. These folks think differently about stocks and their prices and what moves them. I know I do not understand, or better, I don't have the "gut feeling" for what they do, so I personally don't go there. And that is Ok.

I know I am a buy and hold investor. I look forward to stock pull backs to average down to increase the value I hold. Some people have a feel for how the buyers will react and can forecast stock price movement more often than not and capitalize on that. I just don't get it because I get trapped on not being able, in an easy way, to separate the value of a company from the stock price, and then the speculative price that others may perceive it to potentially have.

So, I'm cheap, but I like quality, so I look for bargains with solid management, and I don't understand buying something that is expensive to hopefully sell it at a higher price. I wouldn't buy it at the asking price never mind at a price increase, so that exceeds my comfort zone. So this tells me what I am comfortable with and what styles I can purchase that can complement my own. You don’t have to know everything, just your own style, and the rest falls into place. Learning from the best helps get you there.