Follow The Experts
Does following experts blindly yield lucrative returns, or even beat the index? I remember some time last year (or the year before), there was article in the Business Times reporting that local investors enjoy high returns by simply following behind Temasek Holding's investment actions. According to the report, whenever Temasek invested in a listed company, you just follow, no question asked. At the end you still make relatively high returns (I don’t have the figure with me, need to find that article). Some of you may be able to recall such article.
So is monkey-see-monkey-do strategy works? In my opinion, it definitely will as long as:
1) You do not speculate
2) You follow, even blindly but the correct experts
Point 1) above is important because if you speculates and try to follow blindly, in my opinion, you will end up contributing to the “experts” you followed. But for value investment, which takes time to yield the expected result, it’s ok if you follow the right experts.
On 17 Nov 2007, there was a wonderful article on the Business Times further reinforce that monkey-see-monkey-do strategy does work – if you follow Mr Warren Buffett. When Warren Buffett bought PetroChina in 2003, my course mates and myself were aware of it and wanted to follow him. So what’s stopping me?
1) After Warren Buffett’s investment in PetroChina, its share price surged a bit….I was unhappy about it.
2) To buy Hong Kong stock, which I am not really familiar with, I will incur custodian fees. I don’t really like the additional cost especially when I am not buying large quantity.
Unfortunately, I was wrong. Warren Buffett makes big bucks from PetroChina. And if I followed blindly behind him, I am sure I will also make that kind of money. So we can use monkey-see-monkey-do strategy but do intelligently; at least follow the right experts.
The following is an excerpt of the article in Business Times. Enjoy.
========================================
Business Times - 17 Nov 2007
Even a monkey can get 24% with this investment formula
Investors could beat the S&P 500 just by imitating Warren Buffett's trades
(NEW YORK) Buying whatever billionaire Warren Buffett bought, often months after his share purchases, delivered twice the return of the Standard & Poor's 500 Index during the past three decades.
Investors would have earned an annual return of 24.6 per cent by buying the same stocks as Mr Buffett after he disclosed his holdings in regulatory filings, sometimes four months later, according to a soon-to-be-released study by Gerald Martin of American University in Washington and John Puthenpurackal of the University of Nevada, Las Vegas.
The S&P 500 rose 12.8 per cent a year in the same period.
'A monkey would have beaten the pants off the S&P 500 by following Warren's buying and selling,' said Mohnish Pabrai, who manages US$600 million at Pabrai Investment Funds in Irvine, California.
Mr Pabrai and a friend paid US$650,100 this year in an annual charity auction to lunch with the 77-year-old Buffett.
Mr Buffett's stock picks outperformed his Omaha, Nebraska-based Berkshire Hathaway Inc from 2002 to 2006 when Berkshire shares advanced at a yearly rate of 7.8 per cent.
By comparison, Berkshire holding USG Corp, the biggest maker of gypsum wallboard in North America, increased about 1,140 per cent and PetroChina Co, China's largest oil producer, soared eight-fold.
Mr Buffett built Berkshire Hathaway during the past four decades into a US$200 billion company with businesses ranging from ice cream and bricks to insurance and corporate jet leasing.
Berkshire had US$77.9 billion invested in stocks at the end of September, according to a filing with the US Securities and Exchange Commission.
The company's shares closed on Thursday at US$135,300, the highest price on the New York Stock Exchange.
Does following experts blindly yield lucrative returns, or even beat the index? I remember some time last year (or the year before), there was article in the Business Times reporting that local investors enjoy high returns by simply following behind Temasek Holding's investment actions. According to the report, whenever Temasek invested in a listed company, you just follow, no question asked. At the end you still make relatively high returns (I don’t have the figure with me, need to find that article). Some of you may be able to recall such article.
So is monkey-see-monkey-do strategy works? In my opinion, it definitely will as long as:
1) You do not speculate
2) You follow, even blindly but the correct experts
Point 1) above is important because if you speculates and try to follow blindly, in my opinion, you will end up contributing to the “experts” you followed. But for value investment, which takes time to yield the expected result, it’s ok if you follow the right experts.
On 17 Nov 2007, there was a wonderful article on the Business Times further reinforce that monkey-see-monkey-do strategy does work – if you follow Mr Warren Buffett. When Warren Buffett bought PetroChina in 2003, my course mates and myself were aware of it and wanted to follow him. So what’s stopping me?
1) After Warren Buffett’s investment in PetroChina, its share price surged a bit….I was unhappy about it.
2) To buy Hong Kong stock, which I am not really familiar with, I will incur custodian fees. I don’t really like the additional cost especially when I am not buying large quantity.
Unfortunately, I was wrong. Warren Buffett makes big bucks from PetroChina. And if I followed blindly behind him, I am sure I will also make that kind of money. So we can use monkey-see-monkey-do strategy but do intelligently; at least follow the right experts.
The following is an excerpt of the article in Business Times. Enjoy.
========================================
Business Times - 17 Nov 2007
Even a monkey can get 24% with this investment formula
Investors could beat the S&P 500 just by imitating Warren Buffett's trades
(NEW YORK) Buying whatever billionaire Warren Buffett bought, often months after his share purchases, delivered twice the return of the Standard & Poor's 500 Index during the past three decades.
Investors would have earned an annual return of 24.6 per cent by buying the same stocks as Mr Buffett after he disclosed his holdings in regulatory filings, sometimes four months later, according to a soon-to-be-released study by Gerald Martin of American University in Washington and John Puthenpurackal of the University of Nevada, Las Vegas.
The S&P 500 rose 12.8 per cent a year in the same period.
'A monkey would have beaten the pants off the S&P 500 by following Warren's buying and selling,' said Mohnish Pabrai, who manages US$600 million at Pabrai Investment Funds in Irvine, California.
Mr Pabrai and a friend paid US$650,100 this year in an annual charity auction to lunch with the 77-year-old Buffett.
Mr Buffett's stock picks outperformed his Omaha, Nebraska-based Berkshire Hathaway Inc from 2002 to 2006 when Berkshire shares advanced at a yearly rate of 7.8 per cent.
By comparison, Berkshire holding USG Corp, the biggest maker of gypsum wallboard in North America, increased about 1,140 per cent and PetroChina Co, China's largest oil producer, soared eight-fold.
Mr Buffett built Berkshire Hathaway during the past four decades into a US$200 billion company with businesses ranging from ice cream and bricks to insurance and corporate jet leasing.
Berkshire had US$77.9 billion invested in stocks at the end of September, according to a filing with the US Securities and Exchange Commission.
The company's shares closed on Thursday at US$135,300, the highest price on the New York Stock Exchange.
