Warren Buffett is the most famous stock market investor of all time.
The secret to Buffett’s success, in addition to his genius, is that he loves what he does and conducts deep fundamental analysis on specific companies and industries.
Buffett has estimated that he spends more than 80% of every single day reading.
He pores over the details of companies’ financial statements and flips through reams of information in industry publications.
That exhaustive fundamental analysis has made Buffett rich and world-famous.
Since 1965, Buffett’s holding company Berkshire Hathaway (NYSE: BRK-B) has beaten the S&P 500 by more than 8% per year.
Over that time, Berkshire has generated annualized returns of more than 18% versus the 10% increase in the overall market.
Buffett’s track record, built on a massive amount of reading and fundamental analysis, is incredible.
But it isn’t the best…
In fact, another investor I’d like to discuss has generated far better returns than Buffett, while entirely avoiding fundamental investment analysis!
Jim Simons is the founder of a hedge fund called Renaissance Technologies.
The investment performance that Simons has posted at Renaissance is hard to believe.
The flagship fund for Renaissance Technologies is the Medallion Fund.
From its inception in 1988 through 2018, the Medallion Fund generated annualized returns of 66% before investor fees.
Yes, you read that correctly.
To say that performance is astounding would be an understatement.
It’s more than triple what Buffett’s Berkshire Hathaway has generated since 1965.
It’s more than double what Buffett was able to generate at his own hedge fund in the 1950s, when he faced little competition relative to modern times.
Here’s the most astounding part… It is entirely possible that Simons, while generating this track record, never once glanced at a financial statement.
In fact, Simons may not even know which sectors half of the Medallion Funds’ companies are in! Simons isn’t a fundamental investor.
Instead, he is a technical trader – or, more accurately, a “quant.”
A world-class mathematician, Simons left his Stony Brook University teaching career at age 40 to focus on investing.
At Renaissance, Simons hired an elite group of mathematicians and scientists from all over the world.
He put those brilliant minds to work, using their math skills to build a successful technical trading program.
Given the results, the system Simons’ team came up with and put to use in the Medallion Fund clearly worked.
It worked better than any investment strategy in history, in fact.
Formally, the strategy employed by the Medallion Fund can be described as using computer-based models to analyze data in order to spot nonrandom price movements that are then used to make predictions.
In simpler terms, what the Medallion Fund does is known as technical trading.
The fund takes its trading cues from charts that experts like Chief Income Strategist Marc Lichtenfeld use to make short-term trades. However, in Medallion’s case, the fund uses automation to rapidly make sense of multitudes of numbers and trends.
The fund has made Jim Simons and his investors rich beyond belief.
Despite waiting until he turned 40 years old to seek a career as an investor, Simons is estimated to have amassed a personal fortune of $25 billion.
And he did it without having to spend a single second grinding over companies’ financial statements.
To be sure, there’s a time and place for Buffett’s fundamental approach – specifically with long-term investments like the ones Marc recommends in Wealthy Retirement and The Oxford Income Letter. There’s also a time and place for Simons’ technical-heavy approach – specifically with short-term trades like the ones Marc makes in his VIP Research Service Technical Pattern Profits.