Hints from seven investment masters

YOU can’t teach genius. But you can learn a lot from observing geniuses at work. A few nuggets of investment wisdom from seven master investors:

John Neff

The manager of the Windsor Fund for three decades, John Neff was a quintessential value investor. “To us, ugly stocks were often beautiful,” he wrote in his book “On Investing.” “If Windsor’s portfolio looked good, we weren’t doing our job.”

He was happy to be greatly overweight, or severely underweight, in any of the major market sectors. For example, while oil stocks were about 12 percent of the Standard & Poor’s 500, his holdings went as high as about 25 percent and as low as 1 percent.

John Templeton

Sir John Templeton founded the Templeton Growth Fund in 1954, and it boasted outstanding performance for more than three decades. A pioneer in international investing, he said that investing worldwide gave him more opportunities to find bargains.

As an example, he invested heavily in Japan in the mid-1960s before it was recognized as a world economic power. “Invest at the point of maximum pain,” he liked to say.

He warned against selling a stock — or even worse, a whole portfolio — when it was down. “If you sell your investments just because of a temporary decline, you end up making the loss permanent,” he wrote.

Warren Buffett

“Be fearful when others are greedy, and be greedy when others are fearful.” That’s probably the most famous quote from Warren Buffett. The chairman of Berkshire Hathaway Inc., Buffett is widely considered the greatest living investor.

“Price is what you pay,” Buffett said. “Value is what you get.”

Phil Carret

Phil Carret was one of the pioneers of the mutual fund industry. I like his warning against overuse of borrowed funds.

“While a bank may be perfectly willing to lend (an investor) 75 percent to 80 percent of the value of sound marketable stocks, he would be very foolish to use such borrowing power up to the hilt.”

In his book “The Art of Speculation,” Carret suggested reviewing holdings about every six months. More often than that, he said, will likely make an investor “fall into the evil and usually fatal habit” of excessive trading.

David Dreman

A successful mutual fund manager in the 1980s and 1990s, David Dreman helped to popularize value investing. He is very interested in heuristics — mental shortcuts that people use to reach conclusions when faced with insufficient or confusing information.

One is the “availability” heuristic. Things that stick in one’s mind assume exaggerated importance. “This is why we think deaths by shark attack are more common than deaths from pieces of airplanes falling on people.”

He was also interested in how people draw conclusions from small samples that may just be chance.

Peter Lynch

Renowned for his success running the Fidelity Magellan Fund, Peter Lynch shared some of his ideas in the book “One Up On Wall Street.”

Lynch says that more money has been lost by anticipating recessions than in the recessions themselves. “Of course I’d love to be warned before we do go into a recession, so I could adjust my portfolio. But the odds of my figuring it out are nil,” he wrote.

Martin Zweig

Marty Zweig was a hedge fund manager, newsletter pundit and author of “Winning on Wall Street.” He aims to outperform the market with five out of every eight stock picks, he said, “not a bad batting average.”

Zweig used a multifactor approach to picking stocks. He wanted earnings strength, a stock price that was reasonable in light of the earnings growth rate and insider buying, or at least the lack of heavy selling by insiders.