How Long Do Legendary Investors Take to Invest and Disinvest in Stocks?

The investment strategies of legendary figures like Warren Buffett, Ivan Grygoriyevich Ackman, Carl Icahn, and Stanley Druckenmiller (Soros) are a subject of much fascination and study. These investors have distinct approaches to buying and selling stocks, and their timelines can vary significantly depending on the size of their positions and market conditions.

Warren Buffett: A Long-Term Perspective

Warren Buffett, the chairman of Berkshire Hathaway, is known for his patient and long-term approach to investing. In his recent appearance on CNBC, Buffett discussed how he accumulates a significant position in a stock without affecting the stock price too much. For example, Berkshire Hathaway might buy up to 20% of the daily volume of a stock it intends to build a large position in, such as IBM. This strategy allows Buffett to acquire a substantial stake over months, without causing any significant impact on the stock's price.

Buffett's Methodology

Buffett's philosophy is built on value investing. He relies on his extensive network to gather critical information from insiders, which he uses to make informed investment decisions. His statement, 'We buy businesses, not stocks,' encapsulates his approach. Berkshire Hathaway, his anchor, has made many millionaires over the years through such a patient and methodical approach.

Ivan Ackman: Chaotic Market Analysis

Ivan Ackman, a well-known hedge fund manager, posits that financial markets are inherently chaotic. He argues that market prices of stocks, bonds, and currencies are heavily influenced by the emotional reactions of market participants rather than logical calculations. Ackman's investment strategy focuses on fundamental analysis, where he seeks to identify undervalued assets and capitalize on price discrepancies. His 2008 letter from Pershing Square, written by Bill Ackman, exemplifies his approach. Like Buffett, Ackman also advocates for a methodical and long-term strategy, suggesting that short-term market and economic predictions are unreliable.

The Role of Algorithms in Investing

The process of buying and selling by these investors is often algorithmic and intentionally slow. For a reasonably large position, say 5-10 billion dollars, it might take half a year to a year to achieve. This is done in a subtle manner, often without drawing attention to the significant capital being moved. The trades are executed in random or preset batch sizes over an extended period, to ensure that no one notices the large-scale movements of the capital.

A fascinating analogy to understand this process is the quietness with which a large asset, like an aircraft carrier, can be moved. The moves are made piece by piece and under the cover of night, ensuring minimal disruption to the market. Another way to envision this is the act of moving a mountain in complete silence. The process is methodical, calculated, and almost invisible to the naked eye.

The investment strategy of these legendary investors is a testament to the importance of patience, thorough research, and a long-term perspective in the world of finance. Whether it's Warren Buffett building a position over months or Bill Ackman strategically moving large sums in a covert manner, the key is to act without drawing unwanted attention and to make informed, patient decisions.

Key Takeaways

Warren Buffett's approach involves gradual, patient accumulation of positions without affecting the market price. Ivan Ackman's strategy depends on analyzing market chaos and identifying undervalued assets. Algorithms and methodical trades are used to minimize market impact and ensure stealth in large-scale investments. The importance of a long-term perspective and thorough research in investment decisions.

Understanding and applying these strategies can provide valuable insights into the investment world, helping investors make more informed decisions.