What 5 Well-Known Investors Can Teach You About

At the end of September 2022, SMI, representing Switzerland’s blue-chip equity market, reached 10'267.6 points. It has already dropped by -5.4% month-on-month, just like the capital of those who held it. Is this just a blip or a sign of an upcoming storm?

Well-informed investors know that bull markets never last forever. And those who are both well-informed and well-prepared take it one step further — they invest in assets that do not correlate with the vagaries of the market: the alternatives, such as private equity, real estate, and private debt.

In this article, we will review investment strategies that helped 5 well-known investors grow their wealth for over decades or even generations, staying seemingly invincible against the storms.

Sir John Templeton

“Buy when pessimism peaks, sell at the peak of optimism.”

Most Famous for

John Templeton is considered one of the greatest investors of the 20th century. The Money magazine even called him the “greatest global stock picker of the century” in 1999. His funds held USD 13 billion when they were sold to Franklin Resources in 1992.

Investment Area

Templeton earned money by investing in a pessimistic US market before WW2 and reaped a 400% return within four years.

In 1954, he founded the Templeton Growth Fund and pioneered investing in emerging markets at a time when most investors focused on the US or Europe. In the 1960s, Templeton invested in Japan and profited from its boom from the 1960s to the 1980s.

Lessons for Investors

Look for value. Templeton did not look for good companies to invest in or companies he had an emotional connection to, but looked for companies that were fundamentally undervalued. Thus, you should not invest in Apple stocks because you like the iPhone or on Amazon because AWS (Amazon Web Services) brings in the money. Instead, you should invest in a company that is well-run and undervalued.

Unlike other investors of his generation, Templeton looked beyond the US for opportunities in emerging markets and industries. Today, out-of-the-box value investing is now happening not only in new emerging markets but also in alternative investments.

Templeton was convinced that markets are susceptible to irrational swings in market value. One day, stocks can be buoyant with nothing but the froth of optimism, while on the next day, fear can see prices fall off a cliff. He loved nothing more than to buy undervalued stocks in a pessimistic market or a crisis, and then sell them at a higher price in an exuberant market.

The Chandler Brothers

“Let's do what we love, not just what we are good at.”

Most Famous for

The Chandlers are the greatest investors you have ever heard of. Two brothers from New Zealand turned USD 10 million of family wealth into USD 5 billion within 20 years.

Investment Area

Like Templeton, the Chandler brothers look for value in unusual places. In 1987, they invested in the Hong Kong real estate market. The market had fallen 70% from its peak in 1981, but the brothers looked at the fundamentals and found good undervalued assets. Within four years, the value of their investments had quadrupled.

Similarly, the Chandlers invested heavily in Russia and the Czech Republic when the iron curtain fell, and in Brazil in the early 1990s when most were scared off by hyperinflation.

Lessons for Investors

The Chandlers love to research and build up a knowledge base around an asset class. This not only helps to find undervalued stocks but can also lead you to other opportunities you would otherwise not have come across. You should see each of your investments in a new area as the beginning of a journey of discovery that will open up new investment opportunities.

Once the brothers find a profitable company with an undervalued stock, they bet big to maximize their returns. They call this approach “narrow and deep”. For example, when they bought into Hong Kong real estate in 1987, they did this by investing almost all their family fortune in just four properties.

The Chandler brothers have burnt themselves early on in their careers with leveraged positions, which forces you to seek out short-term returns. The brothers had invested in Hong Kong index futures, but when the market crashed, they were forced to liquidate their positions and missed out on the subsequent rise. From this moment on, they avoided leverage whenever possible so they could take the risk of their positions on longer time horizons. Sometimes the reversion to fair value takes longer than you think.

Mohammed bin Rashid Al Maktoum

“The race for excellence has no finish line.”

Most Famous for

Mohammed bin Rashid Al Maktoum is the Ruler of Dubai, Prime Minister as well as Vice President of the UAE. He oversaw the growth of Dubai into a global city.

Investment Area

Al Maktoum is a visionary leader and investor whose broad range of investments has transformed and modernized Dubai and the UAE. In addition to billion-dollar investments in real estate, education, and infrastructure, he founded Emirates Airlines, the Mohammed bin Rashid Space Center, and Dubai Internet City.

Lessons for Investors

Money is not enough. What counts is how you educate yourself and how you invest your money and knowledge. Many rulers have wasted a fortune, but Al Maktoum has been able to increase his wealth through investments in real estate and by founding innovative companies in growing areas. Apart from the money, he has prioritized improving his personal education and the education of the people in his country.

He has also invested strategically in the future of Dubai and the UAE. With fewer oil resources than Abu Dhabi, he has made Dubai a leading global tourist destination to diversify the economy’s source of revenue. Moreover, Al Maktoum has also sought to make the UAE a leading technological powerhouse in the region. Thus, according to Al Maktoum’s investing principles, investors should not only invest to increase their personal wealth but also invest in projects, which have the potential to make the world a better place.

Peter Thiel

“Over time, the biggest risk that you can take is to not take any risks.”

Most Famous for

Peter Thiel is a co-founder of PayPal, Palantir Technologies, and the VC firm Founders’ Fund. He was also the first external investor in Facebook and wrote an influential book on entrepreneurship called Zero to One.

Investment Area

Thiel built his fortune by investing in tech companies. In addition to founding PayPal and Palantir Technologies, he was also among the first investors in Facebook, SpaceX, Airbnb, Piëch Automotive, LinkedIn, Spotify, Asana, Quora, Stripe, and Block.one. His net worth is estimated to be over USD 9 billion.

He is a lover of science fiction and believes in the power of technology to help solve the world’s biggest problems. Thiel has invested in several biotech and clean technology projects and is a co-sponsor of the OpenAI project alongside Elon Musk.

Lessons for Investors

Seizing opportunities has been a core theme in Thiel’s life. After swapping law for venture capital and making his fortune with PayPal, he has remained vigilant for good investment opportunities. He is a strong believer in tech companies with proprietary technology and network effects that can establish a natural monopoly. Companies with competitive advantages and the ability to lock users in are a gold mine. Following these principles, he has invested in Airbnb, LinkedIn, and Facebook just to name a few.

While you may not have the same insight, network, and money as Thiel, you can now invest early in the types of companies that Thiel invests in. He stresses the importance of not missing out on investing in growing companies. “One of the major mistakes one can commit as an investor is to have a casual approach towards investing. Do not make the mistake of underestimating the power of diverse portfolios in growing companies. It is important to pay attention to growing companies and invest in them.” For example, Moonshot is now offering its members the opportunity to invest in SpaceX and Piëch Automotive, companies that are already present in Thiel’s portfolio.

Ray Dalio

“To make money in the markets, you have to think independently and be humble.”

Most Famous for

Ray Dalio is the founder, co-Chief Investment Officer, and co-Chairman of Bridgewater Associates, the world’s largest hedge fund. It manages around USD 154 billion. He is also famous for his New York Times Bestseller Principles: Life and Work.

Investment Area

His investments are concentrated in currencies and fixed income markets. But he also invests in blue-chip stocks like Walmart, Procter & Gamble Co., and Johnson and Johnson.

Lessons for Investors

In the aftermath of the financial crisis in 2008, “hedge fund” became a dirty word. Nonetheless, Bridgewater has continued to perform and attract funds. This can be attributed to Dalio’s emphasis on careful diversification. “With fifteen to twenty good and uncorrelated return streams, you can dramatically reduce your risks without reducing your expected returns.”

His dedication to diversification is contrary to the approach taken by Templeton and the Chandler brothers. However, it is relevant to note the different goals of these investors. While Templeton and the Chandler brothers focused on maximizing discrete opportunities, Dalio has focused on constant but steady growth.

Dalio also provides a lesson in hard work and principled investing. Coming from a middle-class background, he started his hedge fund from his two-bedroom apartment. Who knows where you could end up with the proper investments?

Summary

These five world-class investors not only show us how to invest our wealth more successfully but also that such success is only possible if we also invest in ourselves. By betting big on ourselves and learning from our investments, we will be transformed along with our fortunes.