The Five Greatest Mutual Fund Managers of All Time

Superb financial managers are like celebrities in the business world. While Warren Buffett is well-known, stock market experts often spend more time discussing the investment strategies and returns of Benjamin Graham, John Templeton, and Peter Lynch. The best mutual fund managers have historically outperformed the market over the long term, allowing their investors to amass sizable fortunes.

Benjamin Graham

Although Benjamin Graham is widely regarded as the founding father of security analysis, he is less commonly recognized for his work as a money manager. He is still eligible for inclusion on our list, though, because from 1936 to 1956, he co-managed a closed-end mutual fund with Jerome Newman. GEICO (NYSE:BRK.A) (NYSE:BRK.A).

Shareholders of Graham-Newman received a spinoff at $27 per share, and the stock ultimately increased to the equivalent of $54,000 per share.

Graham's most profitable investment was in GEICO, which needed to be a natural fit with his deep discount strategy. Graham typically held onto investments for less than two years, but he kept his GEICO shares for decades. He focused mostly on low-risk arbitrage positions.

Sir John Templeton

Forbes magazine called Templeton "the dean of global investing," and the queen knighted him for his charitable work. Templeton was a pioneer of global investing and a master of seizing opportunities in times of crisis.

He was also a CFA charter holder, a donor of Oxford University, and a Rhodes Scholar. Value investor and global contrarian. He planned to make investments at the "point of extreme pessimism," or when he felt the market was most discounted.

T. Rowe Price, Jr.

T. Rowe Price joined the Wall Street scene in the 1920s and established an investment firm in 1937, but he only launched his first fund decades later. In 1971, Price transferred ownership of the company to his employees, and by the mid-1980s, it had gone public on the stock market.

3 A popular quotation of his goes something like, "What is beneficial for the client is also excellent for the firm." 4 Price backed businesses that he believed to be headed by capable executives, to operate in "fertile fields" and to be in a position to become market leaders.

Price was looking for companies that had demonstrated consistent growth over a long period, as he typically held investments for decades. Other major investments included IBM (NYSE: IBM). Price was one of the first financial advisors to charge an AUM-based fee rather than a commission.

John Neff

Neff, born in Ohio, began working for Wellington Management Co. in 1964 and remained there for over 30 years, during which time he oversaw three separate funds. John Neff liked to invest in trendy businesses using backdoors. For instance, if the construction industry was booming, he might have tried to acquire firms that provided building supplies.

Neff prioritized investments in businesses with low P/E ratios and high dividend payouts. When the investment's underlying value dropped or the Price reached his aim, he quickly exited. A big part of his method involved considering the mental side of investing.

He also likes to calculate a "you get what you pay for" ratio by taking the dividend yield plus the growth in earnings and dividing it by the P/E ratio.

For instance, if the dividend yield was 5% and the earnings growth was 10%, he would multiply these figures by the price-to-earnings ratio. To determine this, he multiplied 15 by 10, assuming it was 10. For this situation, 15/10 = 1.5. Attractiveness was defined as greater than 1.0.

Peter Lynch

Lynch, a Wharton School of Business at the University of Pennsylvania alum, engaged in what he called "relentless pursuit." He went from one business to the next, inquiring whether there had been any positive changes that the market had missed.

If he liked it, he'd purchase a little. If the story grew better, he'd buy more, eventually holding hundreds of stocks in what became the world's largest actively managed mutual fund—the Fidelity Magellan Fund.

Lynch is known as a long-term growth-style investor, although he is said to have made the bulk of his money through tried-and-true value and cyclical recovery bets. Lynch is widely credited with popularizing the name Fidelity Investments.

The Conclusion

Both they and their investors benefited greatly from the skills of these elite money managers. What they share in common is that they tend to invest in ways beyond the norm and sometimes even completely ignore conventional wisdom.

Any seasoned investor will tell you that it's more complicated to go your way and generate market-beating returns over the long run. That's why it's not hard to see how those five investors became landmarks in finance.