Following Super Investors - A Winning Strategy?
#33 A Young Professionals Weekly Investing Insights
Today, we're going to dive deep into the playbook of the market's heavy hitters.
We call them the "super investors".
Those who consistently outperform the pack.
And we're not talking about basic stock picks here.
We're talking strategy, insight, and the kind of moves that separate the actual winners from the average Joe.
You know the basics, now it's time to sharpen your edge.
We'll break down their recent plays, analyze their thinking, and extract lessons you can apply to your own portfolio.
No fluff, no filler - just pure, actionable intel.
But first - let’s answer the question:
Who Are Super Investors?
Who Are Super Investors?
Super investors are financial professionals who have demonstrated exceptional skill in managing large portfolios over extended periods.
Think Warren Buffett, Ray Dalio, and Charlie Munger.
These aren't just investors who beat the market once or twice—they consistently outperform over decades.
What makes them "super"?
Consistent Long-Term Performance: Decades of outperformance.
Unique Investment Strategies: They don't follow the crowd.
Market Navigation Skills: They thrive in various market conditions.
Influence: Their moves can sway the market.
Massive Assets Under Management: They manage billions, if not trillions.
Why Follow Super Investors?
You’ve probably heard that following the smart money is a good idea. But what does that actually mean?
Let’s take a look at a real-world example.
5 Years Ago: S&P 500 vs. Super Investors
Imagine you have $10,000 to invest. You can either put it in the S&P 500 or follow the top buys of super investors.
Here's how those two choices would have played out:
Option 1: Investing in the S&P 500
Return: 88.71%
Outcome: Your $10,000 grows to $18,871. Not bad, right? This is why the S&P 500 is a cornerstone of many portfolios.
Option 2: Following the Top 5 Super Investor Picks
Apple (AAPL): Returned 353.50%. Your $10,000 would now be $45,350.
Microsoft (MSFT): Returned 216.79%. Your $10,000 would now be $31,679.
UnitedHealth Group (UNH): Returned 171.78%. Your $10,000 would now be $27,178.
Google (GOOGL): Returned 174.78%. Your $10,000 would now be $27,478.
Charter Communications (CHTR): This one was a bit of a miss, returning -18%. Your $10,000 would have decreased to $8,200.
Total Return for the Top 5: If you had split your $10,000 equally across these five stocks, you’d now have $27,978—a total return of 179.78%.
Key Takeaway
By investing in the top 5 super investor picks, you would have nearly tripled your money, significantly outperforming the S&P 500.
That’s the power of following the smart money.
Understanding the Strategies
But it's not just about numbers. Learning from super investors gives you valuable insights into:
Investment Strategies: Understand what makes a company worth investing in.
Market Trends: Spot the next big thing before the crowd does.
Company Quality: Identify companies that will stand the test of time.
Long-Term Thinking: Develop the patience to see your investments through.
Decision-Making: Improve your own investment decisions by seeing how the best do it.
But a Word of Caution: Blindly copying super investors isn’t wise. Their decisions are based on complex analyses and often involve sums of money that dwarf what most individual investors can afford.
Tracking Super Investor Moves
How to Track Their Investments
13F Filings: These quarterly reports show you what stocks big investors are buying, but keep in mind that the information is slightly outdated.
Data Aggregators: Websites like Data Roma compile this information and make it easier to digest.
Investor Letters and Public Statements: Many super investors write regular letters to their investors, providing insights into their thinking.
Financial News: Stay informed, but don’t get caught up in sensationalized headlines. Always dig deeper for context.
Spotlight on 2024’s Top Super Investor Picks
Let’s dive into the top stocks super investors are buying in 2024.
We’ll break down why they’re attractive and what risks they carry.
Google (Alphabet): The Powerhouse in Tech
Why It’s Attractive:
Search Engine Dominance: Google controls over 90% of the global search market. Imagine being the only restaurant in town—everyone comes to you.
YouTube’s Growth: A media empire in its own right, attracting billions of daily views.
Cloud Business Expansion: Rapid growth and profitability as businesses move online.
AI Initiatives: Google is leading the charge in AI, investing heavily to stay ahead.
Strong Financials: With a rock-solid balance sheet, Google has the flexibility to innovate and outlast competitors.
Potential Risks:
Regulatory Scrutiny: Antitrust lawsuits could force Google to change its business practices.
Ad Market Volatility: Economic downturns could impact ad spending, affecting revenue.
Intense Competition: Rivals like Amazon and Microsoft are also investing heavily in cloud services and AI.
The Bottom Line: Google is a long-term play. If you believe in AI, digital advertising, and cloud computing, this is a stock to hold. But keep an eye on regulatory news—major antitrust actions could create buying opportunities during dips.
UnitedHealth Group: A Giant in Healthcare
Why It’s Attractive:
Market Leader: One of the biggest healthcare companies globally.
Diversified Business: Beyond insurance, UnitedHealth offers healthcare services, making it resilient to industry shifts.
Consistent Growth: Year after year, UnitedHealth delivers strong revenue and profit growth.
Aging Population: With an aging population, the demand for healthcare services will only increase.
Potential Risks:
Regulatory Changes: Healthcare is heavily regulated, and policy shifts could impact profitability.
Rising Healthcare Costs: Higher costs could squeeze margins.
Increased Competition: New players and traditional rivals are stepping up their game.
The Bottom Line: Healthcare is a defensive sector that tends to do well even in downturns. UnitedHealth is a solid pick for stability in your portfolio.
Charter Communications: Betting on Connectivity
Why It’s Attractive:
Essential Service Provider: Internet and cable TV are necessities for most households.
Potential for Recovery: Stock trading at a discount could be a great entry point.
Infrastructure Asset: Owns valuable broadband networks, crucial as demand for high-speed internet grows.
Potential Risks:
Cord-Cutting Trend: More people are ditching cable TV for streaming services.
Intense Competition: Other providers are fighting for the same customers.
High Debt Levels: Charter’s high debt could become a burden if economic conditions worsen.
The Bottom Line: Charter is a contrarian play. If you believe in the long-term value of its broadband infrastructure, consider it as a speculative investment. But keep an eye on their debt levels.
Apple: The Tech Titan
Why It’s Attractive:
Brand Strength: Apple isn’t just a company; it’s a lifestyle.
Ecosystem Lock-in: Products work seamlessly together, creating a strong ecosystem.
Growing Services Segment: Higher-margin businesses like iCloud and Apple Music complement hardware sales.
Innovation Leader: Consistently brings successful new products to market.
Strong Financials: Apple has a massive cash reserve and consistently high profitability.
Potential Risks:
Product Cycle Dependency: Apple relies heavily on iPhone sales.
Supply Chain Risks: Vulnerable to disruptions in its global manufacturing network.
Regulatory Scrutiny: Apple’s App Store practices have come under fire.
The Bottom Line: Apple is a must-have in any long-term portfolio. Buying on dips after a less successful iPhone launch can be a smart move.
Microsoft: The Quiet Giant
Why It’s Attractive:
AI Leadership: Microsoft is deeply invested in AI and leading the charge.
Cloud Dominance: Azure is a major player in cloud computing, crucial to Microsoft’s growth.
Software Ecosystem: Office and Windows provide steady, high-margin revenue.
Gaming Presence: Xbox and game studio acquisitions give Microsoft a strong position in gaming.
Strong Financials: Consistent growth and profitability make it a reliable stock.
Potential Risks:
Cybersecurity Threats: As a major tech player, Microsoft is a prime target for cyberattacks.
Regulatory Concerns: Potential antitrust scrutiny, especially in cloud services.
Intense Competition: Fierce competition from other tech giants in cloud, AI, and gaming.
The Bottom Line: Microsoft is a diversified tech giant that offers exposure to multiple growth areas. It’s a solid pick for anyone looking to invest in the future of tech.
Here’s a quick recap table of the top 5 picks along with a few key metrics:
Understanding the Broader Market Context
Reduced Buying Activity
Super investors are being cautious - buying less compared to previous years.
This suggests they’re wary of current market valuations.
Increased Selling
There’s a lot of selling going on too.
This could mean that super investors are taking profits or rebalancing their portfolios in anticipation of a market correction.
Holding Existing Positions (continued)
Many super investors are holding onto their current stocks rather than making new bets.
This "wait and see" approach indicates uncertainty about where the market is headed. Super investors are known for their patience, and this could be a sign that they’re waiting for better opportunities or more favorable market conditions.
Market Conditions and Sector Rotation
High Interest Rates and Inflation
High interest rates and inflation concerns are weighing on stock valuations, making investors more selective about where they put their money.
This is a time when quality becomes crucial, and super investors tend to focus on companies with strong fundamentals that can weather economic challenges.
Sector Rotation
Some investors are shifting from growth stocks to value stocks, or vice versa, depending on their outlook on the economy.
Super investors often make these moves before the broader market catches on, which is why tracking their investments can give you an edge.
What Should You Be Doing?
1 - Follow the Money
Pay attention to what super investors are doing, not just what they’re saying. If they’re holding onto a stock, it might be worth investigating why. Are they waiting for a better entry point, or do they see long-term value that others are missing?
2 - Reassess Your Own Portfolio
If super investors are selling certain stocks, it could be a signal to reassess your own positions. Maybe it’s time to take profits, or perhaps the risks have increased. Understanding the reasoning behind their moves can help you make more informed decisions.
3 - Diversification is Key
In uncertain markets, diversification is your best friend. Ensure that your portfolio is balanced between growth and value stocks, and don’t be afraid to hold cash if you’re unsure about the market’s direction. Super investors often maintain a cash position to capitalize on opportunities when they arise.
The Most Held Stocks by Super Investors
To finish off, let’s take a look at the most held stocks by super investors:
Amazon (AMZN): The leader in e-commerce, cloud (AWS), and advertising. Amazon benefits from scale and network effects, making it a favorite among super investors.
Meta (Facebook): With a massive user base and big bets on the metaverse, Meta is a high-risk, high-reward play.
Visa (V): As the world moves away from cash, Visa is a solid pick for those who believe in the future of digital payments.
Google (Alphabet, GOOGL): Dominant in search and online advertising, with growing AI and cloud businesses.
Microsoft (MSFT): A leader in software, cloud computing, and AI, Microsoft is a diversified tech powerhouse.
Final Thoughts
These are the stocks the smart money is holding.
If you’re looking for long-term investments, these companies have strong fundamentals and are well-positioned for future growth.
But remember, even the best companies face risks—always do your own research and consider your risk tolerance before investing.
Bonus Section: Insider Insights & Extra Value
As we wrap up, let’s dive into a few more nuggets of wisdom that could sharpen your investment strategy.
We’ve covered the main course, but see these bonus insights as a sort of dessert.
Bonus 1 - Future Predictions: Where Are These Giants Heading?
Apple (AAPL): AI and Wearables Expansion
Apple isn't just about sleek design; it’s about setting trends.
Keep an eye on how they integrate AI into their ecosystem, especially through wearables like the Apple Watch.
Imagine a world where your watch not only tracks your steps but also gives you real-time health diagnostics.
Apple is set to dominate the wearables market with features that could become indispensable.
Microsoft (MSFT): Cloud and AI Dominance
Microsoft is more than just Windows and Office.
With Azure leading the charge in cloud services and AI becoming more deeply integrated into their productivity software, Microsoft is solidifying its position as the go-to for enterprise solutions.
Expect them to keep pushing the boundaries in these sectors, further entrenching themselves as leaders in tech.
UnitedHealth (UNH): Healthcare Data Utilization
The future of healthcare is data-driven, and UnitedHealth is ready to capitalize on this.
By leveraging big data analytics, UnitedHealth could revolutionize how healthcare is delivered and managed, optimizing costs and improving patient outcomes.
They're not just a healthcare company - they're becoming a health tech leader.
Google (GOOGL): Adapting to Regulatory Changes
With great power comes great scrutiny, and Google knows this all too well. As regulatory pressures mount, Google is likely to diversify its revenue streams beyond just advertising.
Look for them to put even more muscle behind Google Cloud and AI.
Especially if regulatory changes force them to pivot.
Charter Communications (CHTR): Infrastructure Focus
Charter might be down, but they’re not out.
As more people work from home, the demand for reliable, high-speed internet is only going up.
Charter could focus on strengthening its broadband infrastructure - which means betting on this increased demand to drive future growth.
Reader Challenge: Put Your Knowledge to the Test
Let’s turn theory into practice with a hands-on challenge:
Choose a Super Investor to Follow: Pick your favorite super investor—maybe someone like Warren Buffett, Ray Dalio, or another market legend.
Create a Virtual Portfolio: Use their latest 13F filings to create a virtual portfolio mirroring their top picks.
Track the Performance: Monitor how this portfolio performs over the next 6 months. Keep an eye on both gains and losses.
Compare Results: Stack up your portfolio against your personal investments or the S&P 500. Did the super investor’s picks outperform?
Share Your Insights: Reflect on the results. What worked? What didn’t? The challenge isn’t just about tracking stocks - it’s about learning and refining your own investment strategy.
I’ll also be doing this challenge - and sharing the results in 6 months time.
Myth vs. Fact: Debunking Common Misconceptions
Let’s clear up some common myths that might be holding you back:
Myth: You need millions to invest like a super investor.
Fact: Not true. You can start small, mimicking their strategies with whatever capital you have. Super investors often build their portfolios gradually, reinvesting gains over time. It’s not about the amount—it’s about the approach.
Myth: Super investors only invest in complex, hard-to-understand companies.
Fact: Actually, many super investors prefer companies with clear, understandable business models. Think Warren Buffett investing in consumer goods and financial services—industries that anyone can wrap their head around.
Myth: Super investors always hold their stocks for decades.
Fact: While long-term holding is a hallmark of many super investors, they’re not afraid to adjust their portfolios based on market conditions. If valuations are stretched or a better opportunity arises, they’ll make a move.
Thanks for reading.
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This newsletter is for informational purposes only and is not intended as financial advice. The insights provided are illustrative and should not be the sole basis for investment decisions. Readers should conduct their own research and consult professional advisors before investing. The authors and publishers are not liable for any financial losses resulting from actions taken based on this content. Investing in the stock market involves risk, including potential loss of capital.