Even the Legends Are Losing in Today's Markets Graham Summers July 11, 2008 Yikes. If anything reveals the difficulty of investing in todayâs market, itâs the fact that investing legends have been losing money hand over fist. The market has fallen over 12% in the first six months of 2008. Meanwhile, many of the worldâs greatest investors have lost moreâ¦ a lot more. The Website www.Gurufocus.com tracks the investments of the worldâs greatest investors. All told, it follows 55 investors, everyone from Warren Buffett to Seth Klarman, the super secretive manager of Baupost Group, who has averaged 20% a year for more than two decades and only posted a single losing year in the bunch. All told, only four of the 55 made money during the first six months of 2008. Let that sink in for a moment. The best of the best are losing money. Some of the biggest names in the bunchâguys like Marty Whitman and Eddie Lampertâare trailing the market by as much as 20%. The ten worst performers were: Legend 6 Month Performance Marty Whitman -43% Mohnish Pabrai -41% Bill Miller -37% Joel Greenblatt -37% Eddie Lampert -28% Robert Bruce -25% Bruce Sherman -24% Charles Brandes -24% Robert Rodriguez -22% Mark Hillman -21% Are these guys secretly idiots, guys who simply got lucky for a few years but really donât know what theyâre doing? Maybe. But I doubt it. You can underperform dramatically for a number of years and still maintain an average that beats the market over time. Richard Pzena, an investing legend in his own right, spoke about this in his 1Q08 conference call. Since the inception of his firm, Pzena Capital Management, Pzena has outperformed the market by nearly 4.5%. Hereâs what he had to say about down years: A very simple strategy, buying the lowest price-to-book stocks over the past 50 years based on the cheapest quintile of the largest 1000 stocks would have resulted in a return of about 200 times the initial investment versus about 60 times for the S&P 500. But along the way, there were 8 times you would have lost 20%. As Pzena notes, by buying the cheapest, largest stocks in the market, you would outperform the S&P 500 by nearly threefold. However, even by focusing on the deep value portion of the market, you would still experience eight years when youâd lose 20%. So while investing legends may be having a tough year, I have little doubt theyâll bounce back quickly. Often times the greatest test of an investorâs ability is not what he does when heâs up, but what he does when heâs down. And I wouldn't want to make a bet against these guys.