Mark Cuban Investing Advice
In the finance world, we—both well-known analysts and laymen investors—have a tendency of deifying business figures who we would like to emulate. It’s the reason that Warren Buffett is a household name. The Oracle of Omaha is practically a national hero because he’s really, really effective at making good investments. Creating mythologies around the ultra-rich and business-savvy is an American pastime at this point, blasted on television, books, and radio alike. After all, if you want to be the best, learn from the best. Which brings us to one of the most well-known and revered investors, Mark Cuban. So let’s take a look at the Mark Cuban investment portfolio, with a specific focus on his best picks for technology stocks.
First, an introduction is in order.
Who Is Mark Cuban?
Before we can answer the question “Should you follow Mark Cuban investments?” it’ll help to get a refresher on just who Mark Cuban is, besides someone who is fabulously wealthy.
Cuban is the typical new-millennium billionaire. Having started out as a humble sales associate for a tech firm (from which he was promptly fired), Cuban ended up creating several businesses, the largest of which was a webcasting company that was able to take advantage of the dotcom boom and earn billions after a Yahoo! Inc. (NASDAQ:YHOO) buyout. (Source: “At Age 25 Mark Cuban Learned Lessons About Leadership That Changed His Life,” Forbes, March 28, 2013.)
So Cuban’s history with technology stocks goes quite a ways back. In fact, Cuban made a large portion of his money due to the technological revolution 21st century.
So the man is quite familiar with technology investments.
Hardly known for being a low-profile introvert, Cuban purchased the NBA basketball team the Dallas Mavericks and continues to be one of the most vocal and active team owners in the league, both to the benefit and detriment of the team.
You can even check out Mark Cuban business investments in real-time on ABC’s Shark Tank, where would-be entrepreneurs and business-hopefuls present their ideas to a panel of “sharks”—successful business owners—who then can opt to buy a share of the company if they feel it has potential for success.
Mark Cuban is perhaps one of the best known sharks on the program, as his profile has extended beyond the show both due to his outgoing nature and his position with the Dallas Mavericks.
Chart courtesy of StockCharts.com
Mark Cuban Stock Investments
Here’s the thing about following the Mark Cuban investment portfolio: He’s a billionaire. Unless you too are a billionaire, there are simply going to be more opportunities and room for risk that he can take that the average investor can’t shoulder.
That doesn’t mean there’s isn’t something to be gleaned from Cuban, it just bears keeping in mind that he will almost certainly have a different investing philosophy versus the average investor.
Not to mention that while billionaires with high-profiles in the finance world are usually billionaires for a good reason, that doesn’t always mean their investment strategy is revolutionary or cutting-edge.
After all, Warren Buffett himself has cautioned his own wife to go for stable index funds rather than invest in his own company, Berkshire Hathaway Inc. (NYSE:BRK.B). (Source: “Why Buffett told his wife to buy index funds rather than Berkshire’s stock,” MarketWatch, May 6, 2017.)
But, thankfully for those looking for something a little more spicy to digest, the Mark Cuban investment portfolio is a bit more interesting.
First, he’s a big proponent of technology stocks. After all, the first steps on his path to becoming a billionaire are thanks to his interest in technology investments at the outset.
The technological revolution 21st century made Cuban the businessman he is today. And for that, he can often be found dabbling in the tech market.
One interesting story involves Uber Technologies, Inc. and how, when the company was just starting out, Cuban had a chance to invest in the budding tech solution to the taxicab business.
Cuban had previously invested in Uber CEO Travis Kalanick’s other venture, and therefore was offered one of the first opportunities to get in on the business.
Cuban was intrigued, but he feared that the obstacles facing the business due to heavy opposition from established cabby businesses, laws, and the industry in general would prove a massive hurdle. While not refusing outright, Cuban did let the investment opportunity die without much pursuit.
Uber’s valuation has now reached as high as $70.0 billion. While the true value of Uber is often in dispute (the company has yet to turn a profit and, to Cuban’s credit, has faced a ton of legal challenges), being able to have cashed in on the startup when it was in its infancy would have been a golden investment opportunity for anyone on the planet.
The ironic thing here being that Cuban himself started out in a heavily entrenched industry that he was able to conquer with a new, innovative technology when he took his webcasting business from startup to multi-billion-dollar acquisition. (Source: “Mark Cuban: Why I regret not investing in Uber,” CNBC, March 13, 2017.)
So if there’s one thing to learn from that story, it’s not to forget your roots! Sure, some investments can seem as if they face daunting odds, but if you believe in the foundations, management, and technology of the company, then you’re more often than not better served getting involved than staying out.
Don’t be like Cuban and suffer from the fear of missing out, especially on a choice investment like Uber or another truly disruptive company.
Another bit of investing advice from Mark Cuban involves the idea that you shouldn’t be putting everything out there on the market.
As I mentioned earlier, Cuban can afford to take a few fliers on companies because he has a ton of cash to burn if need be. Some people are in similar situations, but others cannot be so nonchalant with their investments.
That’s why Cuban recommends that investors have a six-month emergency fund stashed beneath their mattress just in case the market goes belly-up. Cuban is also a huge opponent of high-frequency trading, which he believes games the system and makes it very difficult for regular investors to compete on the open market. (Source: “Mark Cuban’s best investing advice: ‘Don’t’,” Business Insider, July 16, 2016.)
A final lesson to take from the Mark Cuban business investment strategy is diversity.
Cuban got his start with technology, but has since invested in everything from healthy snacks to add-ons for toilets.
The fact is that the businessman is not afraid to take a flier on a number of different intriguing companies from a wide range of backgrounds.
With all that behind us, I hope I’ve been able to answer the question: Should you follow Mark Cuban investments?
Mark Cuban and Technology Stocks
To bring it all back to some concrete investment decisions you can make today (after all, I doubt you’re a member of the Shark Tank cast and therefore will not always be privy to the same investments as Cuban), what are some investing philosophies to take away from the billionaire?
For me, the No. 1 lesson to learn from the Mark Cuban investment portfolio has nothing to do with his portfolio at all but instead with his origin story.
Cuban exemplifies the typical clichéd story of a hardworking, smart guy creating a business with doggedness and determination. But looking beneath that surface story, there’s a strong investment lesson.
Cuban was able to predict the technological revolution 21st century. He jumped on the tech craze buzz at its height, got his money, and diversified his investment portfolio in order to avoid the risk of having all his eggs in a single basket, so to speak.
Being the technology stocks lover that I am, I believe those lessons are ones to live by on the market.
Technology investments have never been more profitable than they are today. Just look at the dominance of tech companies as the richest companies on earth.
There’s a boom going on, and much like Cuban, you can take advantage of that boom with solid investments in companies you believe in, which show strong management and innovative products that people want.
There’s a lot of money to be made in this market, as the technology revolution 21st century has yet to subside, and in fact, has arguably only grown in size since Cuban’s early days.
And unlike the dot-com bust of the 2000s, companies like Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB), and Amazon.com, Inc. (NASDAQ:AMZN) have all proven that they are far more substantial than their hollow counterparts that created the early 2000s crash.
The fact is that you can replicate the success of the Mark Cuban investments (if perhaps not at the same level unless you have millions to play with) because technology stocks are so hot right now.
The NASDAQ Composite (INDEXNASDAQ:.IXIC) is already up nearly 14% since the beginning of 2017. The composite contains many of the best tech stocks in the world, which only goes to show how powerful the position that tech currently holds.
Take Cuban’s advice and learn from his Uber mistake: Find a great company with a strong vision and the ability to execute, and support it. We like to mythologize these billionaire figures, but sometimes, the answers to their success are that simple.