Friday, 27 February 2015

The Copycat Investor

A common investment practice of some investors is to lend themselves to coat tailing other investors with a hope of receiving similar success and they do so not knowing why a particular investment philosophy is practiced in the first place.

While coat tailing is good to practice, I believe more can be had from the benefits of becoming a copy cat investor. This investment style is a little different from coat tailing. A coat tailing investor sits and waits for the copycat investor to go to pasture first with cash and then he follows.

On the other hand the copycat investor has a principle of practice that informs his investment approach and he isn't sitting and waiting for anyone else to lead off. The copycat investor would much rather no crowd to contend with in his investment space.

The coat tail investor searches for the executed investments opportunity and follow the copycat investor.

Who is a copycat investor though?

Warren Buffett is a copycat investor.

How?

He copied;
  1. Ben Graham's net net approach, 
  2. Phil Fisher's scuttlebutt approach,
  3. Henry Singleton's capital allocation approach
  4. Charlie Munger's circle of competence approach
  5. Lego's approach

Mr. Buffett was not interested in coat tailing any these folks, but his preference was to take a little piece of each person's style to make himself whole. Ben Graham turned him down when he suggested Geico as a good investment. Today he owns Geico.

Phil Fisher's approach was too focused on trading the stock at a profit as oppose to owning the company for its long term earning power.

Henry Singleton called everything he touched Teledyne, but his key principle was allocating capital where he could receive the highest and best return on capital employed.

Charlie Munger's approach was simply sticking to what works well and stay within that circle of competence of what he knew.

Lastly, the Lego approach is where Berkshire Hathaway bolts on companies and tucks in other companies into its holdings and guard its competitive advantage with a wider economic moat as much as possible.

That's all for now folks.

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Feel free to ask question and make comment.

FII