Some of the billionaires you hear about frequently in the investing world include Warren Buffet, Carl Icahn, George Soros, David Einhorn, Bill Ackman. There are many others but those are the ones that seem to be in the news most. So the question is: if these guys are so good at picking stocks, why can’t you just do exactly the same as they do and make money too?
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YOU CAN’T DUPLICATE THE PRICES THEY GET
The biggest reason you will be unable to do exactly what your favorite billionaire investor does is because that you will not be able to get the same prices they do. By the time you figure out they bought a stock or sold one, it will be too late for you to get in or out at the same stock price they did.
For all the big billionaire portfolios, the holdings are reported quarterly and that means by the time you learn that Carl Icahn has sold 100% of his Apple stock, AAPL might have gone up or down significantly. Same with the buys: Warren Buffet bought $1 billion of AAPL but it could have been two months before the announcement was made, or two days.
You never know when they are trading and with the volatility of the markets today, the time lag before the information gets to you means the prices you get when you follow their moves will be very different from the prices they got.
Along the same lines, when one of these big investors buys into a company, it is rarely done all at once because the numbers are so big that they do it with multiple buys over periods of days or weeks. They might also add to or sell part of a position months or years later which will change the net price for all the shares owned.
Individual investors will have to be very diligent in keeping track of what these big investors do if they hope to follow in their footsteps exactly. The reality is that very few investors have the time to do that and even if they do, it will be impossible to get the same prices.
OTHER REASONS YOU CAN’T DUPLICATE BUFFET AND OTHERS
There are other reasons why you can’t duplicate Warren Buffett or any other billionaire guru and some of them are listed here. These guys invest such large dollar amounts that they often own a significant % of the company and with that comes special deals and perks that you would never get. They also are not required to list any shorts they have on stocks and for some, this is a meaningful part of their overall strategy.
ITS NOT ALL ROSY FOR THESE WHALE INVESTORS
Carl Icahn had a loss the first quarter of 2016. While he made $2 billion on his Apple stock he has a huge loss with Chesapeake (CHK). David Einhorn’s Greenlight Capital lost more than $3 billion in 2015 or close to 20%. Bill Ackman was up an impressive 40% in 2014 but has since gone on to lose it all back since then. So, do you really want to follow any of these guys?
As with any investor big or small, there will be gains AND losses. The billionaire investors who are famous are not immune to making bad stock picks so you should be aware of that before you blindly try to follow one of them. Perhaps you can get some good stock ideas from them but you must understand that their results will most likely be different from yours for many of the reasons I have outlined here.