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What Are the Hedge Fund Masters of the Universe Buying?

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Investing is one of those rare disciplines in which it really doesn’t pay to be original. This is money, not literature, and they don’t award Pulitzer Prizes for original work.

You don’t want to mindlessly follow the herd, of course. That rarely ends well. Before you copy the trading moves of another investor, you need to do a little homework of your own, and you should always maintain an independent, skeptical mind when putting your capital at risk. But you don’t get bonus points for coming up with an original trade. Returns are returns, regardless of whose idea the trade was, so there is really no sense in reinventing the wheel.

Today, we’re going to take a look at some of the most recent major trades by some of the smartest investors in the business. Not all of these are trades I would recommend myself. In fact, at least one of them is a stock I would run away from screaming. But it’s worthwhile to track which stocks the masters of the universe are buying. Even if we don’t invest along with them on every trade, we might learn a thing or two.

Cheniere Energy 

I’ll start with liquefied natural gas exporter Cheniere Energy (LNG). With the price of crude oil under major pressure in 2015, energy stocks – Cheniere included – have taken an absolute beating. Cheniere is down over 40% from its 52-week high. Yet some of the smartest investors of our lifetimes are backing up the proverbial truck and loading it up with Cheniere.

Last quarter, Seth Klarman – a value investor that most other value investors consider to be an almost legendary god-like figure – increased his already massive position in Cheniere by nearly half. (See “Investing Legends: Baupost’s Seth Klarman”)

Klarman runs a highly-concentrated portfolio; so highly concentrated, in fact, that his top five stocks make up more than half the portfolio. Cheniere now makes up fully 18% of Klarman’s portfolio, and Klarman owns 22 million shares at an average cost basis of $63.57 per share.

So at today’s price of about $48 per share, you can get a much better deal than Klarman, a man universally recognized as one of the savviest value investors to ever play the game.

And Klarman isn’t the only legend aggressively buying Cheniere. Carl Icahn has been aggressively accumulating the shares and bought 27 million shares last quarter at an average price of $61.88 per share. And since the end of the quarter, he’s continued to average down, buying an additional 1.3 million in the mid-$40s. So today, you can buy Cheniere at a better price than Mr. Icahn as well.

What do these legends see in Cheniere, amidst the carnage in the energy market? They’re looking ahead. If you are a European or Asian energy importer, would you feel comfortable trusting your country’s gas supply to Vladimir Putin’s Russia or to the volatile Middle East? Me neither.

If you believer that American gas exports make sense, then Cheniere makes sense.

Mondelez International

Up next is snack food giant Mondelez International (MDLZ), the owner of the Nabisco, Cadbury and Oreo brands, among others.

As I wrote recently (see “Coke in the Crosshairs”) junk food today is somewhat reminiscent of cigarettes 30 years ago. Regulators and activists are using junk food companies as the scapegoat for everything from childhood obesity to adult-onset diabetes.

But just as Big Tobacco stocks have often been some of the best stocks to buy despite the onslaught of bad publicity against them, junk food stocks might also represent a good opportunity. Perhaps that is Pershing Square boss Bill Ackman’s rationale for making a major investment in Mondelez last quarter. Ackman bought 43 million shares, making Mondelez his fourth-largest holding at 13% of his long portfolio.

Like Seth Klarman, Bill Ackman tends to run a highly concentrated portfolio in which he bets big on a very small handful of stocks. When it works, it works fantastically well. Ackman’s hedge fund earned returns in excess of 40% last year.

Alas, running a concentrated portfolio is not without its risks. Ackman’s fund is down about 20% this year, due in large part to its overweighted position in Valeant Pharmaceuticals (VRX).

So, is Ackman’s bet on Mondelez likely to pan out?

Based on the prices he paid, I’d say chances are good. Mondelez trades for just 8 times trailing earnings.

Apple

Up next is one of my personal favorites, consumer electronics king Apple (AAPL). Carl Icahn is probably the highest-profile Apple bull out there. Icahn has about 20% of his portfolio allocated to Apple, and he’s been the loudest voice calling for Apple to return cash to shareholders via dividend hikes and aggressive share repurchases.

But Icahn now has company from fellow hedgie David Einhorn, who increased his already enormous position in Apple by more than half last quarter. Einhorn now owns 11 million shares, making Apple about 20% of his long portfolio.

Apple, as the largest company in the world by market cap, is naturally going to be widely held by large money managers. But putting 20% of your portfolio into a single stock is a bold statement. But given the general sense of bearishness towards Apple these days, is it the right statement?

Let’s take a look. It’s fair to say that Apple is no longer the growth dynamo it was five years ago. The smartphone market, at least in the developed world, is largely saturated. So at this point, most iPhone sales are replacements rather than new purchases. iPad sales have been disappointing for several quarters, and Apple’s newer products – such as the Apple Watch and Apple Pay – haven’t been blockbusters.

Guess what? At today’s prices, none of that actually matters. Apple is not being priced as a growth dynamo. In fact, at 12 times trailing earnings, it’s being priced as a no-growth company. Meanwhile, the S&P 500 trades for 21 times trailing earnings.

That’s absurd. In a broadly expensive market, it makes no sense that Apple trades at such a deep discount. I would follow Icahn and Einhorn here.

Alphabet 

Up next, we have Apple’s rival in the smartphone wars, Alphabet (formerly Google)(GOOGL).

2015 has been the year of the “FANGs,” in which a small handful of stocks – specifically Facebook (FB), Amazon (AMZN) Netflix (NFLX) and Google have been responsible for keeping the market averages afloat.

Perhaps this is what convinced Leon Cooperman to massively increase his stake in Alphabet last quarter. Cooperman bought 213,659 shares of Alphabet in the second quarter and then more than doubled his holdings with a 269,090-share purchase in the third.

Cooperman, who heads Omega Advisors, does not run as concentrated a portfolio as some of the other gurus I’ve covered today. But Alphabet is now his largest holding and makes up a very respectable 6% of his portfolio.

Alphabet is not particularly cheap, trading at 31 times trailing earnings. Also, and much to my chagrin, Alphabet does not pay a dividend, which I consider downright criminal for a company of Alphabet’s size.

Still, Alphabet has been one of the few bright spots this year in a market that has been mostly disappointing, particularly for value investors. If you’re a momentum investor, then by all means, buy Alphabet and ride it higher. Just be prepared to sell when the market gets fickle and turns its affections elsewhere.

International Business Machines

And finally, we get to International Business Machines (IBM), a long-time holding by Warren Buffett. Buffett added about 1.5 million shares to his IBM position last quarter, and it is now his fourth-largest holding.

Buffett is also losing his shirt on IBM. He owns 81 million shares at an average price of $172 per share. At time of writing, IBM trades for just $134.45.

Buffett’s ownership of Big Blue is old news. But he now has company in the trade. Last quarter, Bruce Berkowitz and Eddie Lampert each made new purchases of IBM. Berkowitz bought 754,000 shares, making IBM a modest 3% of his portfolio. Lampert bought 440,225 shares, making it about 4% of his portfolio.

I don’t claim to be smarter than Buffett, Berkowitz or Lampert. But I don’t intend to follow them into this trade either. IBM’s business appears to be falling apart. Revenues have been falling for three straight years with no end in sight, and IBM has been slow to compete with more flexible cloud rivals Amazon, Alphabet and Microsoft (MSFT).

So, what do these storied value investors see in IBM? To be fair, it is a cheap stock at current prices, trading for just 9 times trailing earnings. But remember, those earnings are inflated by IBM’s aggressive share repurchases, and cheap stocks can stay cheap forever in the absence of a catalyst to send them higher.

Frankly, I see no catalyst for IBM right now. After the tumble the stock has taken, a dead-cat bounce is a real possibility. But if I’m going to make a long-term bet in this space, I’d put my money on Microsoft instead.

Disclosures: Long AAPL, MSFT.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Revisiting Icahn’s Apple Call After the Correction

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Activist investor Carl Icahn has known to… ahem… talk his book. He’s been known to talk it quite loudly in fact. If “scream your book” was an expression, that would be an accurate description of what Carl Icahn does.

So, we should probably take Mr. Icahn’s public love affair with Apple (AAPL) with a large grain of salt. Apple stock is, after all, his largest non-controlled holding, representing more than 21% of his portfolio.

Apple stock is down nearly 20% from its 52-week high, and at one point during last week’s market pandemonium it was down over 30% from its 52-week high. So, with AAPL pretty roughed up in recent weeks and trading near $110 per share, I wanted to revisit some of the claims made by Carl Icahn back in May.

Icahn said that Apple is worth over $240 per share. But a lot has changed in the past four months. China’s market bubble turned into a major bust, and the U.S. market entered official correction territory. But if Icahn is accurate, then investors buying Apple stock today should be looking at returns of nearly 120% in short order.

In his letter to Apple CEO Tim Cook, Icahn wrote.

To arrive at the value of $240 per share, we forecast FY2016 EPS of $12.00 (excluding net interest income), apply a P/E multiple of 18x, and then add $24.44 of net cash per share. Considering our forecast for 30% EPS growth in FY 2017 and our belief Apple will soon enter two new markets (Television and the Automobile) with a combined addressable market size of $2.2 trillion, we think a multiple of 18x is a very conservative premium to that of the overall market.

Valuation is Absurdly Cheap

Let’s pick these numbers apart. Earnings forecasting site Estimize, which has an outstanding track record at forecasting company earnings, pegs AAPL’s 2016 earnings per share lower, at $9.54. So Icahn might be a little aggressive in his estimates. But still, even at the lower Estimize estimate, Apple stock trades for a very modest forward P/E of 11.5.

And we haven’t made any adjustments for the cash hoard. If you strip out the approximately $35 dollars per share in cash, you get a forward P/E of 7.9. To put that in perspective, the forward P/E on the S&P 500 is 17.5.

Now, I understand that Apple’s growth will probably slow down…a lot. With Chinese growth slowing and with no product coming down the pipeline to match the importance of the iPhone 6, growth might be very modest in the next few years ahead. But slow enough to justify AAPL trading at half the valuation of the S&P 500? Seriously, even boring, slow-growth utilities like Duke Energy (DUK) sport higher multiples. Duke sports a forward P/E of 13.9.

I think Icahn is far too optimistic about some of AAPL’s current projects. He sees an Apple paid TV service and car as being major moneymakers. Hey, maybe they will, maybe they won’t. We don’t have enough information to draw meaningful conclusions.

But it really doesn’t matter. If Apple never came out with another successful product, its current portfolio alone would make it attractive as a value stock. At these valuations, there isn’t exactly a lot of optimism built into the share price.

Cash Hoard Is Ridiculous

Back in July, I mentioned Apple as a stock with “too much” cash, and broke down the numbers. They’re worth repeating today.

If AAPL’s $203 billion in cash and marketable securities were a standalone company, they would be significantly bigger than Walt Disney (DIS) and Anheuser-Busch InBev (BUD) by market capitalization…and only about $40 billion short of Facebook (FB). Even allowing for punishing tax rates on Apple’s cash held offshore, Apple has enough cash in the bank to sustain its dividend at current levels for years … without earning a single dime in additional profit.

Yes, you read that right. Apple could simply break even for the next 10 years, not turning profit at all, and it would have enough cash to maintain its dividend. That’s not with zero profit growth. That’s with zero proft…period.

And the most amazing thing is that Apple’s cash hoard has continued to expand even while a disproportionate share of it gets dedicated to dividends and share repurchases.

Over the past year, Apple has raised its dividend by 11% and shrunk its shares outstanding by about 5%. And I expect plenty more to come.

Taking the Estimize consensus estimate for next year’s earnings and assigning a ridiculously conservative multiple of 15 gets you to $143 per share, or roughly 30% higher than today’s prices. So while Mr. Icahn might be a little on the aggressive side, I have to agree with him in principle. Apple one of the very best value plays available today.

Disclosures: Long AAPL

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. 

Photo credit: Insider Monkey

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Investing Legends: Baupost’s Seth Klarman

“In capital markets, price is set by the most panicked seller at the end of a trading day. Value, which is determined by cash flows and assets, is not. In this environment, the chaos is so extreme, the panic selling so urgent, that there is almost no possibility that sellers are acting on superior information. Indeed, in situation after situation, it seems clear that fundamentals do not factor into their decision making at all.” – Seth Klarman

In a recent issue of the Idea Farm, Meb Faber starts a great profile on investing demigod Seth Klarman with this quote. Really stop for a minute and re-read it a couple times. Print it out and tape it to your monitor. Next time you live through a good market crash, recite it like holy writ.

The dirty little secret of the money management profession is that we all have Klarman envy. We don’t just want his returns; we actually want to be him, have his super-human emotional control, and be able to wield that power of that brain of his.

Alas, all of us mortals will have to settle for reading his out-of-print book–which sells on Amazon for thousands of dollars. So desperate are value investors to get their hands on a copy of Margin of Safety, I expect that plenty would be willing to do back-alley deals with men in trenchcoats.

At any rate, here is an excerpt of the profile:

Since founding Baupost Group in 1983, Klarman has grown it into a hedge fund giant managing as much as $30 billion. It’s flagship fund has churned out more than 17% annual returns since its founding, handily beating the S&P 500 rise of about 11% annually during that period, and doing it while often holding 40% or more of assets in cash…

How does he do it? Klarman explained his basic philosophy to television talk-show host Charlie Rose during a 2010 interview.

“Investing is the intersection of economics and psychology,” Klarman said. “The economics – the valuation of the business — is not that hard. The psychology – how much do you buy, do you buy it at this price, do you wait for a lower price, what do you do when it looks like the world might end – those things are harder. Knowing whether you stand there, buy more, or something legitimately has gone wrong and you need to sell, those are harder things. That you learn with experience. You learn by having the right psychological makeup.”

Klarman has a special knack for complex transactions that often come with limited liquidity. He has purchased real estate that was acquired by the U.S. government in the savings and loan collapse of the 1990s, dabbled in Parisian office buildings and drilled into Russian oil companies…

Although Klarman seems to delight in fishing for opportunity in obscure and complex deals, he is no slouch when it comes to stock picking. He runs concentrated portfolios, as is evidenced by his positions as of the third quarter of 2014. The top five represented the lion’s share of his invested assets…

As a long-term investor, Klarman doesn’t spend much time monitoring the daily movements of markets. His office features a desk piled high with papers, a computer, some half-filled water bottles, but no Bloomberg terminal, the device with access to market data that traders rely upon…

What Klarman prides himself on as much as making money is not losing it. He has had only two negative years (1992 and 2008).

And here’s a quote that will simultaneously make you love and hate Klarman: “When Charlie Rose asked Klarman to name his biggest mistakes, the Sage of Boston thought a moment but came up empty. ‘I have never really screwed up a lot,’ Klarman said.”

By the way, if you don’t already subscribe to Faber’s Idea Farm, you should. It’s full of good nuggets like these.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Why Carl Icahn is (Kinda) Right About Apple Stock

Carl Icahn is at it again.  After successfully lobbying (some might say “bullying”) Apple (AAPL) into aggressively repurchasing its undervalued stock, Carl Icahn penned another open letter to Apple CEO Tim Cook advocating more of the same, to “accelerate and increase the magnitude of share repurchase.”  By Icahn’s calculations, Apple is worth at least $203 per share, roughly double today’s price.

Icahn owns 53 million shares of Apple stock, making him one of Apple’s largest shareholders.  A cynic could say that Icahn is merely talking his book when he writes that “At today’s price, Apple is one of the best investments we have ever seen from a risk reward perspective, and the size of our position is a testament to this.”

While he might be guilty of speaking in hyperbole, I can’t say I completely disagree with him.  Apple may not be the growth dynamo it was under Steve Jobs, but it is a wildly profitable company trading at a stark discount to the broader market.  Apple stock trades for 16 times trailing earnings and 14 times expected 2015 earnings.  By Icahn’s estimates, Apple stock trades at just 8 times expected 2015 earnings after backing out the value of Apple’s massive cash pile.  Even if Icahn’s earnings estimates are a little aggressive, Apple would seem cheap in a world where the S&P 500 trades for almost 19 times trailing earnings and 15 times expected 2015 earnings.

As is usually the case, the devil is in the details.  Icahn’s estimate of $203 per share came from taking his estimate of 2015 earnings and multiplying it by a forward  P/E multiple of 19.  A forward P/E of 19 is a little on the aggressive side, though not necessarily crazy if you believe that Apple’s outsized returns on equity are sustainable.  In the post iPhone era, Apple’s ROE has consistently been above 20% and for most of that period has been above 30%.

AAPL-ROE

I’m modestly confident in Icahn’s earnings estimates, at least for the next year.  Icahn sees revenues and EPS jumping  next year by 25% and 44%, respectively.  But looking further out, the picture gets a lot murkier.

Let’s dig a little deeper.   The iPhone is Apple’s most important product by a wide margin, accounting for 55% of net sales.  The iPhone 6 has thus far been a hit with consumers, and its larger screen should go a long way to stemming market-share losses to large-screen Android devices.  Icahn sees volume growth of 22% next year and 7% and 10%, respectively, in 2016 and 2017.  That might be doable.  But it depends on consumers continuing to aggressively upgrade their phones, as the high-end smartphone market in the developed world is already saturated.  Icahn is also assuming that Apple “experiences no pricing pressure.”  I’m not so sure that’s realistic given that Samsung is unlikely to sit idly while Apple steals market shares.

Icahn sees the IBM (IBM) partnership leading to 13% annual revenue growth in the iPad. Again, this might be possible.  But tablet sales industrywide have massively decelerated over the past year, and the larger-screen “phablet” iPhone is a direct competitor to the iPad.  Icahn’s estimates here seem a little aggressive but within the realm of possibility, I suppose.

I might be willing to give Icahn the benefit of the doubt on iPhone and iPad sales.  But some of his other projections are a bridge too far.   I have very little faith in the Apple Watch, for example, and I don’t see Icahn’s estimate of 72.5 million units in 2017 as being realistic.  To start, your potential market is limited to people who already own an iPhone.  Let’s say that Apple is able to sell something in the ballpark of 200 million iPhones per year over the next several years.  Is it realistic to assume that roughly one in three iPhone buyers will also buy an Apple Watch?  I’m thinking no.

But it’s his call on Apple Pay that strikes me as being ludicrous.  Icahn sees Apple pulling in a market share of 30% of all debit and credit card purchases by 2017.  Digital wallet adoption has been slow so far, and while that might change, it’s not going to happen on anything close to Icahn’s timeline.  I would be surprised to see Apple Pay accounting for 3% of all credit and debit card sales, let alone 30%.

Looking at back of the envelope estimates, one in four American adults currently owns an iPhone.  Let’s round up and say 30%. Icahn seems to think that all of them will be exclusively using their iPhones in lieu of traditional plastic by 2017.   That’s not realistic, to say the least.

Guess what?

I doesn’t matter.  Icahn’s estimates are likely pretty far off the mark, but I still agree with him completely that Apple is undervalued.  Apple should, at a minimum, trade at a modest premium to the S&P 500 rather than the discount we see today.  And starting at today’s prices, 20%-30% upside over the next year is possible if not likely.

And I would agree with Icahn completely that Apple stock represents one of the best risk/return tradeoffs I’ve ever seen.

Disclosures: Long AAPL in Dividend Growth Portfolio.

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Derek Jeter Retires This Week, But These Five Investing Legends Are Going Strong

On Thursday, September 25, Derek Jeter will take the field at Yankee Stadium for the last time.  A winner of five World Series and selected to the All-Star team fourteen times, he will be remembered as one of the greatest players of his generation and an all-around class act.

Yankees fans are queuing up to say their goodbyes to the Captain, and there is a mini-bubble forming in ticket prices for the game.  As of Tuesday, the average price of a ticket for the game had risen 30% over the preceding week to $845.41.

Retiring at age 40 with a net worth estimated at $185 million, Jeter has had a good run.  But as he enters this next stage of his life—and as Yankees fans ponder the end of an era—there are also some long-tenured gentlemen nearing retirement from that arena a borough to the south: Wall Street.

Today, we’re going to take a quick look at four legendary investors nearing the end of storied careers.  I don’t expect any of these gentlemen to retire, per se.  In fact, I would expect all to die in the saddle with their boots on, God willing.  But when these investing legends do eventually leave for that great boardroom in the sky, they will be missed by generations of investors that learned the trade from watching them operate.

Warren Buffett

warren-buffett-smallAny list of living legends has to start with Warren Buffett.  I hope the Oracle of Omaha lives forever, if for no other reason than I appreciate his wit.  When asked what his plans were after becoming the world’s wealthiest man, his deadpan reply was “to become the oldest.”

He also once commented that he’d retire “About 5 to 10 years after I die” and that he and long-time business partner Charlie Munger “take as our hero Methuselah.”

Congrats, Mr. Buffett.  You’ve managed to do something that so few of us are able to do: grow old gracefully and with a sense of humor.

Buffett admitted to CNBC’s Becky Quick that buying Berkshire Hathaway was the worst trade of his career, yet he’s managed to do quite well, all things considered.   Buffett has compounded Berkshire Hathaway’s book value at an astonishing 17.9% annualized return over the past 30 years, beating the S&P 500 by 6.8% per year.  Again, that’s over a period of 30 years.

Buffett has dabbled in a little bit of everything over the decades, buying everything from silver bullion to complex options and derivatives.  But he is most famous for his philosophy of buying great businesses with competitive “moats” around them selling at fair prices.

Well done, Mr. Buffett.  You’ve made a lot of people wealthy over the course of your career.

Marty Whitman

martin-whitman-smallNext on the list is Marty Whitman, founder of Third Avenue Management and lead portfolio manager of the Third Avenue Value Fund (TAVFX) for most of its history.  Like Buffett, Whitman is a noted value investor, though he tends to focus more on “deep value” special situations.   And like Buffett, Whitman has been around for a while; he’s worked in the investment management business for more than 50 years.

Whitman retired from full-time management of the Third Avenue Value Fund in 2012, though he remains active in his company and as opinionated as ever. His letters to investors are as entertaining as they are insightful; if you are a student of finance, I recommend you spend a few days browsing them (see letter archive).  In his most recent letter, Whitman digs into the dirty details of GAAP accounting.

Whitman’s insistence on balance sheet quality has served him well:  over the past 15 year, his Third Avenue Value Fund has outperformed the S&P 500 by 2.4% per year over the past 15 years.

Carl Icahn

carl-icahn-smallMy enduring memory of the 78-year-old Carl Icahn will always be his manhandling of fellow activist investor Bill Ackman live on CNBC over Ackman’s Herbalife (HLF) short.  At one point, Icahn called Ackman a schoolyard crybaby.

Icahn isn’t the warm, grandfatherly type like Warren Buffett.  He’s kind of a mean old man, to be honest.  But he’s a hard-nosed, no-nonsense investor with a reputation for fixing broken companies. He’s also a natural contrarian. In his own words, “The consensus thinking is generally wrong. If you go with a trend, the momentum always falls apart on you. So I buy companies that are not glamorous and usually out of favor. It is even better if the whole industry is out of favor.”

Over the past five years, Icahn’s flagship hedge fund has outperformed the S&P 500 by 8.9% per year.

In recent years, Icahn has taken very large and high-profile positions in Netflix (NFLX) and Apple (AAPL) and was a very loud advocate for Apple’s expanded buyback program.

Love him or hate him, we’ll be talking about him years after he’s gone.

Irving Kahn

irving-kahn-smallIrving Kahn has seen it all.  At 108 years old, his career predates the Great Depression.  In fact, he made his first trade—a short sale of a copper mining company—in the summer of 1929, was just months before the Great Crash.  Like Warren Buffett, Kahn studied under Benjamin Graham, the father of value investing as a discipline.  He was also one of the first professionals to earn the CFA designation.

If I am lucky enough to still be alive at 108, I probably won’t still be running money.  Frankly, it’s a stressful job.  The fact that Kahn is still actively managing portfolios is testament both to incredible genes and to the emotional detachment he brings to his value investing methodology. Per the Kahn Bother’s website,

Kahn Brothers thinks of a portfolio as an orchard of fruit trees. One cannot expect fruit every year from each species of tree. Investments can and often do have varied and unpredictable timetables to maturity. We believe a suitable time horizon for investment fruit to ripen for harvest can be three to five years or longer. Indeed, a key factor in realizing outstanding performance is having the discipline and patience to maintain time-tested principles and not abandon the orchard before the fruit has ripened.

At 108 years old, Kahn has no doubt learned a thing or two about patience.

George Soros

george-soros-smallAnd finally, we come to the granddaddy of macro hedge fund traders, George Soros.

Soros’ investment returns were the stuff of legend.  In its heyday between 1969 and 2000, Soros’ Quantum Fund generated annual returns in excess of 20% per year.

Soros will be forever remembered as the man who broke the Bank of England—and as the man who pocketed nearly $2 billion in a single day shorting the pound.

Soros doesn’t do a lot of trading these days; he focuses more on political causes and leaves most investment decisions to his very capable lieutenants.  But he’s still very much in the news, recently meeting with Argentine president Cristina Fernandez de Kirchner and very publicly suing BNY Mellon over the failure of the bank to release bondholder funds in the wake of Argentina’s recent technical default.

Soros’ fund has also been accumulating shares of one of my favorite global shale gas plays in Argentina’s YPF (YPF).

This piece first appeared on InvestorPlace.

Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

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