But wisdom is not the only thing we can get from well-known, proven investors. From time-to-time we can get their investment ideas, more affectionately known as 'ride their coattails'. Some of my most profitable investments have come from someone else's idea.
But you must exercise caution. Warren Buffett may have an incredible track record but he is not infallible. You would be a fool to blindly buy what someone else is buying without developing your own opinion of its merits. Riding coattails is merely a starting point for thorough analysis.
There are a handful of investors to whom I pay attention. If I see their name in a headline I read it immediately. The following are a few of their names:
- Warren Buffett, Berkshire Hathaway
- Mohnish Pabrai, Pabrai Investment Funds
- Whitney Tilson, T2 Partners
- Bill Miller, Legg Mason Capital Management
- Chris Davis, Davis Funds
- Walter Schloss, retired
One problem with riding coattails is you won't be the first or only person to receive the information. So you will not have an information advantage over the rest of the market. In fact, the market will probably have the information before you. Generally, when news breaks that Buffett has been buying a stock the price of said stock jumps well before most of us could react. So, again, a word of caution: Use coattail riding only as a starting point for your analysis.
Why do these guys disclose what they are buying? It obviously could create problems for their own buying programs. The simple answer is: They are required to do so by the SEC. Bill Miller and Chris Davis run mutual funds. The SEC requires them disclose, on a periodic basis, everything their funds own. The others run hedge funds or other non-mutual fund entities. In that case, they are required to disclose to the SEC some or all of the securities holdings under various circumstances.
Keep your eyes open for news about great investors with whom you are familiar. It might lead to your next great investment.
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