Clockwise from top right: Thyra Zerhusen, David Herro, Susan Byrne, Warren Buffett. (Photograph by Mark Weiss, portrait illustrations by Keith Witmer.)
If the stock markets were a public beach, the red “high hazard” flags might still be flying over the lifeguard’s chair. Or at the very least, a strong yellow. The summer has been calmer than the spring, but not by much, not with the foundering euro and stubborn unemployment at home offering daily reminders that global economic waters are still choppy. And the stock market remains as riptide-prone as ever. According to Schaeffer’s Investment Research, the Dow is on pace to register 90 days this year with swings of 100 points or more—more than twice as many as in any of the three years before the crash. As fund managers keep warning, many of last year’s top-performing stocks were risky or near-death companies that now are struggling once again. Small wonder that many mainstream investors remain anxiously on shore—collectively, Americans hold $9.4 trillion in cash, 27 percent more than in 2007.
Of course, where fearful investors see threatening surf, the most successful pros see big-kahuna waves that they can ride to profits. We focused this year’s installment of “The World’s Greatest Investors” on four people who’ve proved they can make good money in stocks even in difficult times. And indeed, some were more upbeat after the market’s ugly summer tumbles than they were before it—after all, their favorite stocks were cheaper.
That said, these managers are anything but blasé about the rough market—and, for what it’s worth, none of them believes that new financial regulations will affect their portfolios much—yet. With a combined 100 years’ investment experience among them, they’re being selective and disciplined as they decide which stocks are safe to own. Susan Byrne, a veteran of many decades in the mutual fund world, is moving into big conglomerates that pay fat dividends; Thyra Zerhusen likes smaller firms that dominate niche markets, especially in tech or industrials. International-investing specialist David Herro thinks the best way to ride out the market’s turmoil is to buy stocks in Europe—even though Europe instigated much of that turmoil. And even the venerable Warren Buffett has been reshaping the sprawling Berkshire Hathaway empire to make it less vulnerable to the market’s unpredictable tides. For more about how these proven veterans are balancing caution and opportunism, read on.
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