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Explore the Investing Strategies of America’s Billionaires

(Source: forbes.com)

Common sense. An eye for potential. A finely-tuned mix of risk and discretion. With massive fortunes backed by decades-long careers, these top investors have applied a variety of money-making methods to secure and grow their wealth. Today, their fortunes amount to a combined net worth of $2.9 trillion—built in a range of industries, from digital media to energy to video games. Here’s a window into approaches that help America’s richest investors get richer.

CEO, BERKSHIRE HATHAWAY

NET WORTH: $88.3 billion

SOURCE OF WEALTH: Berkshire Hathaway

One of the most successful investors of all time has a decidedly common-sense playbook: Only put your money into companies you understand, and don’t overpay. In a career spanning five decades, Buffett’s Berkshire Hathaway has acquired over 60 companies that fit the bill, including Dairy Queen, Geico and Duracell. Since he likes to own companies for the long haul, he looks for businesses that have a track record of making money, strong management and little debt. 

Perhaps more importantly are the investments Buffett hasn’t made. The famously patient and frugal 88-year-old has been perfectly content to sit on the sidelines as others are swept up in the frenzy of the dot-com era or the boom in cryptocurrencies. “We make no attempt to pick the few winners that will emerge from an ocean of unproven enterprises,” he wrote in his 2000 annual letter.  

INVESTOR

NET WORTH: $3.9 billion

SOURCE OF WEALTH: Online media

Cuban became a billionaire selling Broadcast.com to Yahoo in 1999 and now owns the Dallas Mavericks. He’s invested nearly $22 million in companies that have appeared on the show Shark Tank, where he is a judge, plus millions elsewhere. Cuban says that when making an investment, “I look for businesses that are unique and make me wonder ‘why didn’t I think of that?’” One holding is Genetesis, a startup medical device company in Ohio that uses noninvasive biomagnetic imaging to diagnose chest pain. He’s also backed 3D printing firm Fabric8 Labs and esports betting service Unikrn.

CHAIRMAN & CEO, RED APPLE GROUP

NET WORTH: $3.1 billion

SOURCE OF WEALTH: Investments, real estate, oil

Catsimatidis, who dropped out of NYU just shy of graduating to work in the grocery business, now owns Gristedes supermarkets in Manhattan, an oil refinery in Pennsylvania, and nearly 80 apartment and office buildings. For the past 12 months, he’s had 70% of his stockholdings invested in financial and energy companies, but says he is looking to make his portfolio more conservative. Half of his money is managed by big firms like JPMorganChase, Wells Fargo and Bank of America, while the other half is managed by his own staff. Last year the inhouse team outperformed the outside heavyweights, returning 15%, 2 percentage points better than the banks. Read more.

PARTNER, S-CUBED CAPITAL

NET WORTH: $2.7 billion

SOURCE OF WEALTH: Venture capital

Stevens, a longtime partner at Silicon Valley venture capital firm Sequoia, started his own firm, S-Cubed Capital, in 2012. He says that because he started with a basket full of tech stocks from his time at Sequoia—the firm was an early backer of Yahoo, Google and LinkedIn—he’s been working to diversify his holdings into energy, healthcare and real estate, including senior housing. “If we do have a tech recession, tech stocks could take a 30% or 40% hit,” he says. The vast majority of his portfolio is in public stocks or private companies. He’s also put money into funds investing in retail and in European companies, and owns a minority stake in the Golden State Warriors NBA team. Read more.

INVESTOR, YARBROUGH CAPITAL

NET WORTH: $2.2 billion

SOURCE OF WEALTH: Video games

Yarbrough sold his Video Gaming Technologies for $1.28 billion in cash in 2014 and has since been investing the proceeds. He makes most of his own investment decisions. About half of his money is in bonds with short-term maturities. One-fourth is in technology stocks such as Nvidia, Google and Facebook. “It’s what I understand and am comfortable with,” says Yarbrough. A buy-and-hold investor, he’s owned Microsoft for 30 years and Apple for over a decade.

Typically he looks for companies that are growing fast, are profitable and have a low price/earnings growth ratio (under 2). “The hardest thing is knowing when to sell,” admits Yarbrough, who unloaded Tesla in July after deciding its valuation was too high. The rest of his money is in alternative investments such as private equity, lending funds and hedge funds, though he’s selling off the latter due to low volatility and poor returns. “They are fantastic for hedge fund managers, but bad for investors,” he says. Read more.

CREDITS: Timothy Archibald for Forbes; GP Images/Getty Images; AJ_Watt/iStock; Andrew H. Walker/Getty Images; Nancy Rothstein Photography/Courtesy of Mark Stevens; Jason Myers; franckreporter/iStock

More Info: forbes.com

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