The Big Win: Learning from the Legends to Become a More Successful Investor

Chapter 2

Follow the Money

The Ugly Reality of Whale Watching

Whale watching—that is, following well-known investors—is a favorite pastime on Wall Street. The media love reporting on the latest purchase or sale by Warren Buffett or Carl Icahn or Steve Cohen. There are expensive newsletters and data services dedicated to this sport, and no doubt some people have earned back their subscription fees by mimicking the moves of “legendary” investors. But I contend that blindly following anyone into a single trade is a fool’s errand and there are many reasons to support this conclusion. For one thing, no investor, no matter how legendary, has a perfect record, and you just might find yourself following a legend right over a cliff. It is also the case that legendary investors may have very different investment objectives from yours. For example, what if the legendary investor is looking long term—happy and able to be in a position for decades, as Buffett is,¹ while you are seeking short-term profits? Buffett can wait out a losing position or absorb it as need be, but you, on the other hand, likely do not have the same resources. These can be hard lessons. At least, I found them to be so.

My Wall Street career began on the equity trading desk at Oppenheimer & Co. in what could now be defined as the dark ages of technology. E-mail was more of a novelty than a default communication mode; the Internet was still a twinkle in Al Gore’s eye (wink, wink), and High Frequency Trading (HFT) was defined ...