There are certain dormant talents in everyone. Anyone able to utilise them properly can achieve extraordinary things. A Lionel Messi, for example, is not the best footballer in the world just because he trains every day: on the pitch the Argentinian has the gift to make the right decisions at the right moment. In the music business, too, it is talent that generally leads to success. In technical terms Beatles legend Paul McCartney may be a good bassist, but he became one of the most successful stars in rock history because he has the ability to capture the mood of the time with many of his songs. And the same applies for other great rock heroes such as Bruce Springsteen, Eric Clapton and the late Freddy Mercury.
It’s quite simple: on the stock market, too, there are exceptional talents who have the ability to approach things the right way. They have developed methods that enable them to recognise better than others what can still be expected from which shares. Allied to experience and the courage to go against the flow every now and then, their investment decisions may not be right all the time, but they are right astonishingly often. Over the long term this leads to outstanding results expressed in above-average returns. That brings us to our theme, because what, after all, is there to stop us utilising the particular abilities of these “rock stars of the stock exchange” for ourselves? Nothing. A new tracker certificate on the Swissquote Value Rockstars Index gives investors a simple way of investing in a basket of international equities that also rank highly in the portfolios of the grandmasters of the stock market. How it works is explained later. First, though, some prominent examples from the Hall of Fame of equity investment. It is no coincidence that these are proponents of value investing, because this investment style, which compares the intrinsic value of a company with its stock market value, may be an oldie, but it has lost nothing of its capacity for hits.
The Hollywood movie “The Big Short” came out in 2015. This acclaimed film, which went on to garner five Oscar nominations, shows how the financial markets crisis of 2007 to 2009 unfolded. One of the central figures in the Wall Street thriller, which is based on true events, is hedge fund manager Michael Burry, played by Christian Bale. He was one of the first and the few to recognise that the market for subordinated US mortgage loans had become a huge bubble that would sooner or later burst with a spectacular bang. Although initially ridiculed for his analyses, Burry took the right decision and speculated against the market from an early stage. When the crash predicted by Burry actually came, he and his hedge fund, Scion Capital, made hundreds of millions of dollars just as the international equity markets were plunging. The native Californian has since acquired legendary status. In 2013 Burry founded the investment company Scion Asset Management. Many of his investment decisions continue to cause headlines.
One man who has made a name for himself worldwide both as a successful investment manager and as a book author and inventor of the “Magic Formula” is Joel Greenblatt. This formula works on the good and cheap principle: buy shares of profitable companies that are traded below value on the stock market and wait until the market price and the actual value coincide. He determines such shares by looking at fundamental ratios such as the return on capital and profitability. This method has enabled Greenblatt’s investment company, Gotham Asset Management, to beat the market for years. Another to have made it into the hall of fame of value-oriented investors is Stanley Druckenmiller. The former partner of George Soros is one of the most successful investors of all time. The secret of his success? Identify macroeconomic trends and invest in assets that will profit from these trends over the long term. In 1986 Druckenmiller founded the hedge fund Duquesne Capital Management, which achieved an average annual return of 30 per cent, before the fund was converted into a family office in 2010.
Source: Dimensional, Report: When It’s Value vs. Growth, History Is on Value’s Side, Februar 2022
