5 Investors With Better Returns Than Warren Buffett

By Damian Davila on 19 February 2015 1 comment

When you're referred to as the "Sage" or "Oracle," you know you're doing things right.

Born in 1930, Warren Buffett is regarded as one of the most successful investors in history. The Oracle of Omaha gets a great deal of attention because he's not only down to business, but also down-to-earth. Despite his multi-billion fortune, he still lives in his modest home in Omaha, Nebraska. (See also: 7 Stocks Warren Buffett Loves - And You Should Too)

However, there are several critics that claim that Buffett's performance, particularly since 2009, is more myth than reality. Here are five investors who give Buffett a run for his money. (See also: Self-Made Billionaires: Investment Lessons From Their Success)

1. Carl Icahn

Just like the entertainment world has the "Colbert Bump," the world of investments has the "Icahn Lift." The Icahn Lift describes the surge in stock price when Carl Icahn starts acquiring shares in a company.

Born in New York City, Icahn has, in some ways, an arguably better record than Buffett. From 1968 through 2011, Icahn grew his original $100,000 investment in his firm at a 31% annual rate, while Buffett's Berkshire Hathaway had "only" a 20% annual growth rate. This statistic doesn't offer a full picture of each investor's stock picks, but it's a meaningful point of comparison.

Despite his impressive record, there are two main reasons why Icahn is not as popular as Buffett. First, he is one of the most well known "corporate raiders" or "shareholder activists." Picture a financial Robin Hood of sorts that steals from the greedy, inept managers to give back to the shareholders. By following this strategy, Icahn has challenged several well-known businessmen, such as former Time Warner CEO Richard Parsons, and received plenty of criticism from the media. Second, Icahn's quirky ways and contrarian investment strategies aren't as easy to digest for the average investor as Buffett's charming comments and no-nonsense investment style.

But at the end of the day, money talks. And Icahn's cash is very loud!

2. George Soros

Born in Hungary in 1930, George Soros is a renowned hedge fund manager and one of the world's greatest investors.

Unlike Buffett's slow-and-steady approach, Soro's strategy is to take bold, yet very profitable, bets. He is best known for his September 16, 1992 transaction, when he made a single-day gain of $1 billion dollars by short selling the British pound (a short sale is a bet that the value of something will drop). This successful bet earned him the nickname of "the man that broke the Bank of England," and cemented his reputation as one of the premier currency speculators in the world.

Soros continues to make headlines. For example, as of September 2014, his investment firm held a $2.0 billion bet that the U.S. stock market would collapse. Will he be right again and make a huge fortune? Only time will tell.

3. Peter Lynch

While you may not his name, you've heard one or more of his investment mantras:

  • "During the Gold Rush, most would-be miners lost money, but people who sold them picks, shovels, tents, and blue-jeans (Levi Strauss) made a nice profit."
     
  • "Know what you own, and know why you own it."
     
  • "Never invest in any idea you can't illustrate with a crayon."
     
  • "All the math you need in the stock market you get in the fourth grade."

Peter Lynch's books One Up On Wall Street and Beating The Street have sold millions of copies and are considered mandatory reading for any investor, regardless of level of expertise.

But Lynch is not all theory. He has the business acumen to back up his investment advice. He was at the helm of Fidelity's Magellan Fund, one of the world's best known actively managed mutual funds from 1977 to 1990.

Lynch's record is very impressive. If you had invested $1,000 in Fidelity's Magellan Fund during Lynch's tenure, you would have earned $28,000. During those 13 years, Lynch reportedly beat the S&P 500 Index (a key benchmark of the stock market) in 11 of those 13 years. He transformed $18 million in assets into more than $14 billion.

4. John "Jack" Bogle

Buffett has laid out two clear instructions in his will:

  • Deliver cash (no shares because those will all go to charity) to a trustee for his wife's benefit; and
     
  • Advise the trustee to put 10% of the cash in short-term government bonds and 90% in Vanguard's S&P 500 index fund.

If Buffett is willing to put 90% of the cash in his will in a Vanguard fund, then the performance of that company must be pretty darn good. When you talk about Vanguard, you have to talk about John Clifton "Jack" Bogle. He is the founder and retired CEO of The Vanguard Group.

Under Bogle's leadership, Vanguard became the second largest fund company, commanding $428.4 billion, or 8.83% of all mutual-fund assets by Bogle's retirement in 1999. The number one spot that year went to Lynch's Fidelity.

Bogle has long been a champion of low-cost index investing. He advocates sticking to index mutual funds without commision charges and with low turnover of assets. Given Buffett's lackluster performance since 2009 and decision to leave 90% of his will in a Vanguard index fund, it looks like Bogle's "plain vanilla" ways may have the last laugh.

5. Michael Steinhardt

Last but not least, Michael Steinhardt is a Wall Street legend. From 1967 to 1995 (that's 28 years!) his hedge fund returned an average of 24.5% annually. What's even more impressive about this return is that it was possible even after Steinhardt's 20% cut of the profits.

To put this in perspective, let's imagine that you had $10,000 back in 1967:

  • If you had invested it all in Steinhardt's hedge fund, you would have ended with $4.8 million by 1995.
     
  • On the other hand, the same $10,000 in the S&P 500 would have been worth $190,000.

Steinhardt achieved his remarkable annual returns with a wide variety of financial instruments, ranging from stocks to bonds to options. Unlike other investors, he is equally proficient in short and long time horizons.

What does Steinhart himself have to say about Buffett? "He is the greatest PR person of recent times and he has managed to achieve a snow job that conned virtually everyone in the press to my knowledge," he claimed back in 2011. Only a man with Steinhardt's Wall Street record would have the chutzpah to make such a remark.

Are there other investors that should be on this list? Let us know in the comments!

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5 Investors With Better Returns Than Warren Buffett

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Guest's picture
Guest

Joel Tillinghast - 25 year track record also as a Fidelity manager.

Damian Davila's picture

Great suggestion, Guest! I'll keep him in mind for upcoming articles about strong performing investors.