Two of the best investors in recent decades have been Warren Buffett and Neil Woodford. Certainly, the latter has experienced a difficult year, but there have been times when the former has also made mistakes and been on the wrong side of the market. In the long run though, they have consistently delivered market-beating performance which has rightly made them among two of the most talked-about investors of their generations.
Valuation focus
For many investors, share prices are what matters. When they go up, the prospects of investing in the stock market improves as the outlook for the local and global economies is generally on the up. This may make it feel as though investing is less risky than it is when shares are in the midst of a bear market.
However, Buffett and Woodford do not view it as such. They take the opposite view in terms of preferring to buy shares when they are trading at a low ebb. Not only does this mean there may be greater upside potential, it also means they may have less downside.
This focus on value over price seems to be becoming increasingly rare in today’s stock market. That’s even though most investors seek to buy low and sell high. As such, adopting a value mentality could be a shrewd move for most investors.
Strong track records
As alluded to, both investors have delivered consistently high returns over a long period of time. However, within those track records have been periods of underperformance. Sometimes, such periods have seen them diverge from their respective benchmarks by a significant amount. However, in the long run they have generally been able to provide significant alpha for their investors.
Interestingly, neither Buffett nor Woodford seem to pay much attention to a benchmark, or to what other investors are doing. They seem disinterested in trends and which stocks are fashionable at a particular time. For example, Neil Woodford avoided the tech bubble, while Warren Buffett emerged from the financial crisis in a strong position. This focus on what they are doing and where they see value opportunities means that, while underperformance is inevitable at times in the short run, in the long run they have the opportunity to deliver impressive track records.
Reaction to criticism
During their periods of underperformance, both individuals have been criticised by the media and by their investors. While this is perhaps to be expected, neither has significantly diverged from their core investment strategy. Certainly, they are likely to have improved as time has passed, but they have remained committed to their philosophies even amidst significant criticism.
This ‘stubbornness’ has proven highly effective in both cases in the past. The reality is that no investor is capable of outperforming the market or their benchmark all of the time. Therefore, having courage in your conviction and confidence in your ability appears to be a must-have for any investor seeking to emulate the achievements of Warren Buffett or Neil Woodford.
