11 May 2023
As a professional investor, looking back over history can be inspiring and unforgettable. We live in a world of high technology, instant messaging and volatile markets, a world away from the pre-1980 boom. This makes some of the following seven trades even more impressive, the fact they were carried out in an era without the high-tech we take for granted today.
As a professional investor, George Soros was a man who stood by his principles and conviction. In 1982, as sterling came under pressure, it became apparent to everybody else (but the Bank of England) that the UK could not stay in the Exchange Rate Mechanism (ERM). Shorting the pound, as interest rates went into double digits, before finally leaving the ERM, George Soros is believed to have profited to the tune of $1 billion.
This legendary professional investor/trader correctly predicted the 1929 stock market crash, which led to the great depression. But, better than that, he acted on his research, making a fortune in the process. It is rumoured that he banked a cool $1 million in one day alone when his shorts came to fruition. But unfortunately, after amassing a $100 million fortune, he was declared bankrupt in 1934 and died in 1940.
Where do we start with Warren Buffett, the ultimate professional investor? Berkshire Hathaway, Warren Buffett's investment vehicle, started acquiring Coca-Cola shares in 1987, just after the crash. Increasing his holding in 1988 and 1989, he spent $1.3 billion for a holding of 400 million shares. Early this year, it was revealed that dividends to date total $10.2 billion, and the holding was worth just over $24 billion. That is some return on a $1.3 billion investment!
In 1987, just before the worldwide stock market crash, everything appeared rosy, the worldwide economy was flying, and the property market was in vogue. Yet, while the signs were there, overheating and rampaging economies, investors continued to plough money into the stock market. Paul Tudor Jones predicted the 1987 crash, shortening the US stock market just before the monumental fall. How much did professional investor Paul Tudor Jones make? It is rumoured he banked a cool $100 million.
Billionaire professional investor and hedge fund owner John Paulson was among the few to predict the US subprime mortgage crash in 2007/8. This crash led to a worldwide depression from which many economies are still to recover. Taking a contrarian bet against the housing market, John Paulson shorted $25 billion worth of securities and banked a $15 billion windfall. In hindsight, the signs were there, but John Paulson was one of the few to act on his research.
In the early days of the technological revolution, there was scepticism and cynicism for the new up-and-coming giants of tomorrow. Then, a modern-day professional investor, Carl Icahn, spotted the undervalued gem we now know as Netflix. He began acquiring shares in 2012, banking $960 million from his last trade alone and a staggering cumulative profit of more than $2 billion. Akin to a modern-day Amazon, Netflix furrowed the path which many similar companies have followed.
As two of the most recognised professional investors at the time, Bill Ackerman and Carl Icahn went to war over Herbalife. Ackerman instigated a $1 billion short, alleging the company was nothing but a pyramid scheme. This led to a $200 million settlement with the US government, while multibillionaire Carl Icahn took the opposite position. Eventually building up a stake in excess of 20%, Icahn is rumoured to have earned $1.3 billion from his investment, while Ackerman lost $1 billion.
History is littered with memorable trades where professional investors have taken an alternative position to the broader market perception. From Netflix to sterling, spotting stock-market crashes to the Herbalife situation, the investment world is genuinely unpredictable. As a professional trader, one day is thankfully never the same as the last!Back to News