How to invest like Warren Buffett and Ichan
My favorite investment styles are Carl Ichan, net worth 26 billion, and Warren Buffet, net worth 89 billion. Ben Graham is their common denominator. In other words, they are Ben Graham value investors. I use both in my investment strategy.
Here are their similarities.
Firstly, both are in business to make money in the stock market.
Secondly, they pursue undervalued companies using the Graham model.
Thirdly, they are long term investors, although Ichan is viewed as short term.
Fourthly, they buy similar companies, like Apple.
Fifthly, they will buy the whole company when possible
Similarly, they will sell their positions but not often.
The difference between Ichan & Buffett
So that is where their investment similarities begin and end. My style is more like Ichan with an aggressive posture. Both are aggressive when they see the value they jump to buy. I look at their investments using https://www.gurufocus.com/guru/list
Ichan looks for undervalued companies then moves to make changes in the company through aggressive tactics. So he will buy a large position and then force the directors to make changes to increase shareholder value. For example, he forced eBay to divest their position in Paypal.
Buffet on the other hand seeks value then buys and holds. He has no activist involvement in the companies. When the stock pulls back he buys more. Apple Computer is his largest position and has increased. Similarly, Ichan jumped in to buy Apple long before Buffett back in 2013, so by 2014, he owned 52 million shares. Therefore holding a 3.6 billion dollar position.
Buffet bought his first 10 million Apple shares in 2016. Ichan predicted Apple’s value at $626 a share. So by 2020, Apple reached $535 a share. By 2016 Ichan sold his entire Apple position missing his own predicted run-up in the stock. So Ichan made 2 billion dollars profit in 32 months.
However, Buffet has scored an 87 billion dollar gain in Apple appreciation based on a larger position.
I take profits and lose money. So it’s the wrong way of thinking. Charlie Munger, Buffet’s partner calls it temperament. My temperament is to cash in and lose money. I don’t actually lose, I just make a lot less. Therefore, this year I decided to change my temperament.
How temperament makes money
Changing my temperament is not easy. In fact, it seems impossible. My asset recovery business is based on cashing in. Therefore my goal is to move to cash. My real estate business is buying and hold. Therefore my asset increases in value and pays out cash. So I get appreciation and cash.
My asset recovery business also increases in value as I increase my 30 thousand customer base. Increased profits interpret as increased value. Therefore as my company grows, it grows in value. Will I sell the company one day? The answer is probably no. Why would I sell an income-producing asset that I know long operate?
The same applies to my real estate investments. Like Buffet investment strategy of holding appreciating income-producing assets.
Buffet and Ichan are rich because they buy and hold income-producing assets. Like both, I also own Apple Computer, so I make a small income off their dividend and then take that to buy more Apple stock.
The same applies to my asset recovery business http://hemispherestrade.com/
I have owned this company since 2009. So the income produced since then has been several million dollars. Today, other people run it, but I still get income. Therefore it is almost totally passive income.
The same applies to Ichan and Buffet investment strategy except on a much smaller scale.
What we can learn
In conclusion, what can we learn from Buffet and Ichan when it comes to investment strategy?
Firstly, it’s better to buy and hold when you have the right income-producing asset.
Secondly, income-producing assets can be public or private companies.
Thirdly, both investors own companies outright, and portions of others.
Fourthly, temperament in all investing, as in life determines profitable outcomes and wealth.
Therefore, following the way these investors work, helps me to understand my strategy and temperament. So by understanding their method, I can better adapt to my own.
My strategy is to apply both their methods. The hard part is knowing when to sell out. And knowing when not too.
Mike Addis, Carlsbad California
Want To Get More?