The financial crisis in 2008 was disastrous to the portfolio of a lot of investors. Then the market collapse created opportunities that haven’t been in decades. Two years later, the market is back to almost where it was in Jan. 2008. After the roller coaster riding, the market is getting close to one full cycle. This cycle serves as a perfect test for soundness of investing strategies. With that in mind, we want to check which Gurus had positive returns from 2008 to 2010, and had the least risk in their investing.
The financial crisis of 2008 has been called the “Black Swan” event. Investing strategies that were thought to be solid failed to pass the test of the crisis. The quick recovery in 2009 and 2010 was a surprise to many investors, too. True investors can overcome the fear and seize the opportunities.
This is the investment returns of the Gurus we track, including both Hedge Fund Gurus and Mutual Fund Gurus. In the table for the type of the gurus, H stands for Hedge Fund Gurus, M stands for Mutual Fund Gurus. Model stands for Guru Focus model portfolios.
|Hedge Fund Gurus||Portfolio/Fund||2008 Gain (%)||2009 Gain (%)||2010 Gain (%)||3-Year Gain (%)||Type|
|David Tepper||Appaloosa Investment LP I||-26.72||132.72||22||108.1||H|
|John Paulson||Advantage Fund||24.1||13.75||11||56.7||H|
|Donald Yacktman||The Yacktman Fund||-26.05||59.31||12.64||32.7||M|
|David Einhorn||Greenlight Re||-17.6||32.1||15.9||26.2||H|
|Bruce Berkowitz||Fairholme Fund||-29.7||39.01||25.5||22.6||M|
|Daniel Loeb||Master Fund||-38||38.5||41.5||21.5||H|
|Chuck Royce||Premier Fund (RYPRX)||-28.3||33.3||26.46||20.9||M|
|Steven Cohen||SAC Capital International Fund||-19||28.39||15||19.6||H|
|Paul Tudor Jones||BVI Global fund||-4.9||16.51||7.5||19.1||H|
|Louis Moore Bacon||Moore Global||-4.3||20.6||3||18.9||H|
|Diamond Hill Capital||Small Cap Fund||-25.99||28.92||22.99||17.3||M|
|Steven Romick||FPA Crescent Fund||-20.6||28.4||12||14.2||M|
|RS Investment Management||RS Partners Fund||-38.62||43.67||27.96||12.8||M|
|Arnold Schneider||Schneider Small Cap Value Fund||-45||54.04||32.2||12.0||M|
|Westport Asset Management||Westport Fund||-30.28||32.26||20.36||11.0||M|
|Most Broadly Held Portfolio||-29.6||40.3||11.3||9.9||Model|
|Bill Nygren||Oakmark Fund||-32.61||44.77||12.18||9.4||M|
|Francis Chou||CHOU ASSOCIATES FUND||-29.3||29.7||19.21||9.3||M|
|Most Weighted Portfolio||-34||39.9||16.7||7.8||Model|
|Robert Rodriguez||FPA Capital Fund||-34.79||40.19||17.72||7.6||M|
|Tweedy Browne||Tweedy Browne Value Fund||-24||27.6||10.51||7.2||M|
|John Rogers||Ariel Fund||-48.25||63.42||25.97||6.5||M|
|Jean-Marie Eveillard||First Eagle Fund of America||-30.74||26.13||21.3||6.0||M|
|Larry Robbins||Glenview Capital||-50||82.7||15.3||5.3||H|
|James Barrow||Vanguard Selected Value Fund||-35.49||36.26||19.44||5.0||M|
|Richard Perry||Perry Capital||-27||25.2||14.6||4.7||H|
|Edward Owens||Vanguard Healthcare Fund||-18.45||20.96||6.16||4.7||M|
|Wallace Weitz||Weitz Partners Fund||-32||27.6||19.9||4.0||M|
|Jeff Auxier||Auxier Focus Fund||-24.52||24.76||10.1||3.7||M|
|Bill Frels||Mairs & Power Growth Fund||-28.51||22.52||17.4||2.8||M|
|PRIMECAP Management||Vanguard Primcap Fund||-32.41||34.45||12.89||2.6||M|
|Manning & Napier Advisors, Inc||Equity Series (EXEYX)||-36.32||39.58||13.86||1.2||H|
|Mario Gabelli||Asset Fund Class AAA||-37.2||30.54||23.07||0.9||M|
|Ruane Cunniff||Sequoia Fund||-27.03||15.38||19.5||0.6||M|
|David Winters||Wintergreen Fund||-39.05||32.78||21.09||-2.0||M|
|Richard Aster Jr||Meridian Value Fund||-34.73||21.4||18.23||-6.3||M|
|Chuck Akre||Akre Capital Private Asset Man||-42.92||37.54||18.5||-7.0||M|
|Brian Rogers||T. Rowe Price Equity Income Fu||-35.75||25.62||15.15||-7.1||M|
|Arnold Van Den Berg||CM Value I Composite||-33.54||24.15||12.06||-7.5||M|
|David Williams||Columbia Value and Restructuri||-47.4||46.9||19.42||-7.7||M|
|John Hussman||Hussman Strategic Growth Fund||-9.02||4.63||-3.62||-8.3||M|
|S&P 500 Index||-37||26.5||15.1||-8.3||M|
|John Keeley||Small Cap Value Fund||-40.18||21.67||25.98||-8.3||M|
|Mark Hillman||Focused Advantage Equity Compo||-43.75||42.45||14.18||-8.5||M|
|John Buckingham||Al Frank Fund||-43.6||35.02||18.61||-9.7||M|
|Richard Snow||All Cap Equity Composite||-44.25||41.2||14.45||-9.9||M|
|Ron Baron||Baron Partners Fund||-46.67||28.2||31.52||-10.1||M|
|Martin Whitman||Third Avenue Value Fund||-45.6||44.5||13.9||-10.5||M|
|Third Avenue Management||Third Avenue Value Fund||-45.6||44.5||13.9||-10.5||M|
|Mason Hawkins||Longleaf Partners Fund||-50.6||53.6||17.89||-10.5||M|
|Robert Olstein||Olstein All Cap Value Fund||-43.8||37.01||16.17||-10.5||M|
|Kenneth Fisher||Purisima Total Return (PURIX)||-42.95||36.18||14.74||-10.9||M|
|Jeremy Grantham||GMO US Intrin.Val. III (GMVUX)||-33.8||20.5||11.59||-11.0||M|
|NWQ Managers||Nuveen Multi-Manager Large-Cap||-36.16||22.39||11.11||-13.2||M|
|Sarah Ketterer||International Value Fund||-41.95||32.01||11.98||-14.2||M|
|Consensus Picks Portfolio||-45.4||33.1||17.7||-14.5||Model|
|HOTCHKIS & WILEY||Large Cap Value Fund||-47||34.32||19.85||-14.7||M|
|Dodge & Cox||Dodge & Cox Stock FUND||-43.41||31.27||13.48||-15.7||M|
|Chris Davis||Davis Financial Fund||-45.62||39.11||11.25||-15.8||M|
|Ronald Muhlenkamp||Muhlenkamp Fund||-40.39||31.49||6.14||-16.8||M|
|Guru Bargains Portfolio||-48.8||34.6||16.6||-19.6||Model|
|Charles Brandes||U. S. Value Equity||-55.44||34.98||15.95||-30.3||M|
|Ken Heebner||CGM Focus Fund||-48.2||10.5||16.94||-33.1||M|
|Murray Stahl||Horizon Asset - Core Value||-56.5||28.5||12.9||-36.9||M|
Here are some observations. Among all Gurus, hedge fund giant David Tepper had the highest return. His hedge fund Appaloosa Investment LP I had the total return of 108%, more than doubled the money. His fund lost 26% in 2008, which is lower than the market loss by more than 10%.
As a benchmark, the three-year cumulative return of S&P500 is -8.3%. Any number above -8.3% is outperforming.
The second best return is also from hedge fund world, John Paulson. The portfolio we track here is Paulson’s Advantage Fund. The fund had three years of double digit gains and produced a cumulative return of 56%. Paulson’s other funds may have better returns over the past three years.
Among all mutual fund gurus, Donald Yacktman had the highest return. His three year cumulative return was 32%. Donald Yacktman had a smaller loss in 2008, but he sees the opportunity in the market, and quickly bought into beaten down small caps and made an impressive gain of almost 60%. He underperformed slightly in 2010. But if an investor can outperform by double digits in an more reasonably valued market, who cares if he underperforms by 2-3% in an overvalued market? Danald Yacktman’s return is 6% better than the next mutual fund Guru, Fairholme’s Bruce Berkowitz.
Hedge fund manager David Einhorn had a loss of 20% less than the market in 2008. His three-year cumulative return is among the best in the Gurus. His overall portfolio risk is small, as we can see from his relatively stable performance.
Bill Nygren’s Oakmark Fund lost 32% in 2008, thanks to his holdings in Washington Mutual. But his three-year return is 9.4%. It is better than the market by almost 18%.
John Hussman had a much smaller loss in 2008, but he missed the opportunities in the next two years. His 3-year performance is about even with the market.
Ken Heebner was the hottest mutual fund manager on the earth in 2008, after gaining 80% in 2007. Money poured in his fund at exactly the wrong time. He lost almost 50% in 2008. Missed opportunities in 2009. His fund is still one-third below where it was in Jan. 2008. He must be losing a lot of clients. But who knows, maybe now is the best time to invest in his fund.
Two out of our model portfolio of Guru Strategies did well in the three years: Most Broadly Held Portfolio and Most Weighted Portfolio, gained 9.9% and 7.8% respectively, without counting dividends. Consensus Picks Portfolio and Guru Bargains Portfolio did poorly as they had high losses in 2008. Most Broadly Held Portfolio and Most Weighted Portfolio invest mostly in large cap stocks. The portfolios are less risky.
After the Guru Strategies, we also developed Model Portfolios of Value Strategies. Top 25 Undervalued Predictable Companies and Buffett-Munger Screener top 25. They outperformed the market by wide margins in both 2009 and 2010. The numbers are not available for 2008.
As always, we at GuruFocus are trying hard to find out what is working for long term value investors. We take this opportunity to invite you for a 7-day Free Trial of our Premium Membership if you have not joined. Take advantage of Gurus’ research by upgrading your membership.