To know the true stock market legends is to know the Elder Statesmen of the market. Decade after decade these men have beaten the averages to a bloody pulp, reaping billions of dollars in profits for their investor and themselves.
Net Worth: $14.7 billion
Probably one of the most recognizable names to the public — both investors and non-investors — Carl Icahn has been winning the
stock market games for more than a half a century. Just a regular guy from Queens, New York, Icahn got his start as a stock broker but soon after moved into arbitrage and options trading.
But his career really took off when he became a corporate raider, taking hostile positions in companies such as TWA, RJR Nabisco, US Steel, and Time-Warner just to name a few. His latest deals have centered around Herbalife and Apple.
Net Worth: $23.5 billion
Simons started his career on a decidedly non-financial path. Graduating from MIT with a BS in mathematics and UC Berkeley with a PH.D in the same, Simons was recruited by the National Security Agency to join their code breaking program during the Vietnam War.
Afterwards, Simons returned to academia, as the chairman of the math department at Stony Brook University.
In 1982 he founded Renaissance Technologies, a hedge fund management company that operates three funds. It is widely considered one of the most successful hedge funds in history, having returned an average of 35% annually after fees to its investors.
Net Worth: $8.6 billion
Though he is often remembered for breaking the Bank of England on a currency play — and in the process pocketing a cool one-billion dollar profit — Soros is a major player in the stock market.
Soros originally started his flagship Quantum Fund in 1973 with the goal of earning $500,000 in five years in order to fund his ambition of becoming a writer and philosopher. As of 2013, the fund had generated more than $40 billion in profits.
Soros’ son Robert has been quoted as saying that often his father’s investment strategy often has to do with the physical discomfort – for example, if he started to get a back spasm he would take that as a sign that he should sell a position.
A supporter of progressive and liberal causes, Soros has donated $8.5 billion through his charitable organizations.
Net Worth: $4.3 billion
Robertson founded Tiger Management Corp in 1980 with initial seed funds from his family and friends. At one point the fund managed a total of $22 billion.
According to Robertson the philosophy behind Tiger’s strategy was simple, “Find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short them. If the 200 best don’t do better than the 200 worst, you should probably be in another business.”
Despite being successful for most of his career, and spawning a number of “cubs” who went on to run successful funds of their own, Robertson closed his fund in 2000 after some missteps, most notably a bad investment in U.S. Airways.
Now let’s look at The Gurus of the market. These are the hedge fund managers who’s every word investors around the globe hang on trying to figure out any insights they can.
Net Worth: $5.3 billion
Kovner first came to the public’s attention when he was profiled in the seminal book Market Wizards. While attending Harvard his mother committed suicide and just short of his Ph.D. Kovner left school and embarked upon a series of odd jobs including driving a cab.
His first trade was bankrolled by a cash advance on his MasterCard, a trade which he claims taught him about risk/reward. Later he was mentored by legendary trader Michael Marcus and ultimately establish Caxton Associates in 1983.
A known conservative, Kovner has donated to a number of Republican political campaigns.
Paul Tudor Jones
Net Worth: $5.8 billion
In 1987 PBS made aired a program entitled TRADER: The Documentary in which PTJ was shown as a young, semi-arrogant, trader who basically called the market crash. This was the vehicle which solidified his place in the world of market gurus.
Jones is a favorite with celebrities — his best friends are Sting and his wife Trudy Styler — and is often seen at various charitable events out on Martha’s Vineyard.
He self-described his style in the Market Wizard’s book by saying, “The public will say that Paul Tudor Jones called the bottom of the market, but they won’t know about the five, ten, or fifteen times I tested the bottom theory but was stopped out.”
Net Worth: $14.1 billion
Perhaps one of the most followed stock market legends is Steve Cohen. It seems as if he can’t turn around without the financial press reporting on him. Whether it’s an addition to his impressive fine art collection or the latest Westchester property he’s acquired, everyone wants to know what Steve is doing.
Cohen got a reputation as a “hands on trader” often managing up to 10% of the portfolio in his SAC Capital Partners Fund. A rapid-fire trader, Cohen rarely holds positions for extended periods of time.
Recent run-ins with the SEC has caused Cohen to shutter SAC and turn it into a family office.
Net Worth: $4.4 billion
Druckenmiller started out his career in finance in a rather boring way, beginning as a management trainee at Pittsburgh National Bank and then as a consultant to Dreyfus.
But it was when George Soros hired him in 1988 to replace Victor Niederhoffer at the Quantum Fund that he really began to make a name for himself.
That association with Soros — as well as his stellar performance with his own Duquesne Capital fund — has kept him as perennial favorite follow of the investing public.
Druckenmiller is a top-down investor with a similar style to his mentor Soros. He also uses futures and currencies to hedge his stock positions.
In 2009, he was recognized as the most charitable man in America by donating $705 million to various foundations.
Next up, the Young Guns of the market. These are the next generation of stock market legends. The youngest is thirty-nine and the oldest is forty-eight, which in hedge fund years makes them teenagers.
Net Worth: $3.3 billion
Okay, truth be told, John Arnold has technically made his fortune by investing in energy futures, first as a wunderkind at Enron and then with his own Centaurus Fund. However, he is the youngest trader on this list and the only one I have met in person, so I included him.
Arnold showed what he was made of when he crushed Amaranth Advisors and rival wunderkind Brian Hunter in a natural gas showdown in 2006 to the tune of $6.5 billion.
Though announcing his retirement from running his hedge fund in 2012, many expect him to return in the future due to his age.
Net Worth: $15 billion
Another Harvard alumnus, Griffin started two hedge funds from his dorm room, claiming to execute trades in between classes. His first fund was seeded with $265K which included money from his grandmother. His first big profit came from shorting the 1987 stock market.
His Citadel hedge fund is considered one of the most successful hedge funds in the world, and with $14 billion under management, one of the largest as well.
Griffin has a widely publicized rivalry with fellow hedge fund manager Daniel Loeb, which has included attempts to poach each other’s employees.
Net Worth: $1 billion
If you are a poker fan, no doubt you have seen David Einhorn on one of his many final tables at the World Series of Poker. He is considered one of the brightest lights in the hedge fund community.
Einhorn’s claim to fame is his shorting not just Lehman Brothers, but numerous others companies related to the subprime markets in 2007.
His regular communication with the press, notably his “power point presentation” have been known to move individual stocks quite dramatically.
Net Worth: $2 billion
Yet another Harvard alumni, Ackerman started his first hedge fund right after graduation in 1992. But his star began to rise when he formed Pershing Square Capital Management in 2004 with $54 million in funding — comprised of personal funds and those of his former business partners.
He has taken high profile positions in Target and Herbalife, the later ending up on the other side of the battle with Elder Statesman Carl Icahn. He was also one of the few who made a killing during the financial crisis of 2008 by shorting credit default swaps (CDS) issued by MBIA.
Ackman is a well-known philanthropist, having committed more than $160 million through his Pershing vehicle since its inception. This includes $10 million to Human Rights Watch, $25 million to help public schools in Newark, N.J., as well as a $25 million gift to the Signature Theatre designed to fund innovative arts programs.
Now for the The Enigmas of the market. These are the mystery men, the ones nobody has ever really figured out, though not for lack of trying. Their opaque nature though has not kept them from beating the markets handily.
Net Worth: $17 billion
Dalio started his investing career at the age of 12 when he bought $300 worth of Northeast Airlines and tripled his investment. A stint at Long Island University and an MBA from Harvard followed.
In 1975 he formed Bridgewater Associates which is the largest hedge fund in the world managing over $154 billion in assets. In 2007 Dalio predicted the financial crisis in an essay entitled, “How the Economic Machine Work; A Template for Understanding What is Happening Now.”
Recently, there has been a little more light shined on his process as he has started sharing his “investment secrets” on short, animated videos he narrates on YouTube.
Net Worth: $13 billion
Rising from humble beginnings in Pittsburgh, Pennsylvania, he paid his way through the University of Pittsburgh by working in the library. After graduation he went on to Carnegie Mellon University where he earned an MBA.
Originally going to work for Republic Steel he was eventually recruited by Goldman Sachs where he stayed for six years until leaving to start his fund, Appaloosa Management.
Appaloosa earned $7 billion in 2009 by buying beaten down financial stocks early in the year and selling them when they rebounded later in the year.
Tepper is a philanthropist, donating to various organizations including a $55 million gift to his alma mater Carnegie Mellon.
Net Worth: $1.3 billion
Getting an early education in the market from his grandmother who was a big fan of Louis Rukeyser’s Wall Street Week,they would sit for hours and evaluate her stock picks from the daily paper.
Lampert later went to Yale and is a member of the infamous “Skull and Bones” organization.
After graduation he worked at Goldman Sachs, often directly with Robert Rubin. Leaving in 1988, he founded ESL Investments with funding from investor Richard Rainwater and mogul David Geffen among others.
In recent years most of the news around Lampert has centered on his acquisition of Sears. The stock of the company has continued to plummet and the end goal of the investment is not clear to the public or the financial press.
Net Worth: $1.5 billion
Perhaps less is known about Klarman than any other on this list. Coming from humble beginnings, Klarman went on to graduate from both Cornell and Harvard University.
He is the author of the book Margin of Safety, Risk Averse Investing Strategies for the Thoughtful Investor, of which Warren Buffett is reported to have a copy on his desk, and when found, can go for as high as $1,500 per copy.
A conservative investor, he buys unpopular assets and then hedges them with a combination of derivatives. He rarely speaks in public or grants interviews.
What Can You Learn from Them?
In the past four articles I have given a brief bio and overview of the investing strategies of various investors who fall into the category of “legends.” Every one of them is a billionaire — some many times over — and most have come to their expertise and wealth through the most traditional of Wall Street institutions.
As average retail investors it is tremendously entertaining to follow the exploits of these men, seeing what deals and intrigues they are involved in, but a serious question has to be asked, “Can studying their careers and investing strategies help us with our investing?”
The short answer to that question is “No,” and the long answer is, “Well, possibly, but probably not, but maybe!”
The fact of the matter is, there is very little that these legends do in their investing process that the average investor can replicate. The hedge funds that they run have huge staffs full of analysts, statisticians, strategic planners, math quants, and brokers. And all of them are the best of the best in their profession.
With that much infrastructure in place they can comb through investing opportunities in all corners of the stock market and then analyze them top-down, bottom-up, technically, fundamentally, in relation to the economy, market, and their individual sector. They just have the analytical fire power us mere mortals don’t.
In addition, someone like Carl Icahn, George Soros, or Steve Cohen can call up the CEO of a company they are thinking of investing in and have a “sit down” just to see how things are going. It may not be insider info — or it may be — but either way it is access that is not available to the general investing public.
So other than for entertainment value — which arguably might be reason enough — what does following the exploits of market legends teach us about investing?
One important lesson we can learn is that everyone is fallible and has their setbacks in the market. Each of the legends I profiled have had deals go wrong, issues with regulators, or losing streaks. But in all cases they persevered and ended up coming back stronger than ever. That is a trait that every retail investor can learn from.
But perhaps the best lesson we can learn from them is that no matter what size portfolio you are working with in the market you always have to focus on risk first. You can’t make a billion dollars unless you first make a hundred, then a thousand, then a million, and the way you make progressively bigger profits is to stay in the game and get better at it.
And if you don’t have the funds to stay in the game, you are out. These market legends know that, and that is why they always focus first on what they can lose, not what they can win. That is a key trait in their success and something that every investor, no matter what skill level or account size, can learn from.