Chris Lowe (CL): Thanks for talking with us today, James. I’ve been reading your blog for almost a decade, so I’m quite familiar with your background, but would you mind explaining it a bit for our readers?

James Altucher (JA): I ran a hedge fund for several years. Many of my investors were, themselves, top hedge fund managers. I also am now in about 30 different angel investments. And in 2000, for better or worse, I ran a $125 million venture capital firm during the dot-com bust. So I’ve seen the top highs and the worst lows.

CL: Working for hedge funds, you must have been exposed to a lot of different investing strategies. Was there one that stood out as particularly effective?

JA: I realized one thing that is very important. If you’re the smartest person in the room, you’re standing in the wrong room.

I’ve had many successful investments and many unsuccessful ones. When I lay them all out and see what distinguishes the all-stars from the zeroes, I see one thing in common: Someone smarter than me had already invested in the successful investments, even at higher prices.

So I started to develop a strategy around that. I had banks that wanted to make ETFs out of it. Other funds wanted me to build a hedge fund around the idea. Another time, I even made a very popular website around the idea. It had over a million visitors a month.

More recently, I haven’t been as involved in financial media, so I’ve just traded the strategy for myself in my private and public investments. And it’s worked very well.

Here’s a hypothetical example of how it works: Let’s say Warren Buffett buys IBM stock at $100. Then it goes to $80.

Sure! I will buy it there. It’s as if Warren Buffett was my unpaid intern, and I get a discount to what the best investor in the world is doing.

Since I know so many of the top hedge funds in the world from my own hedge fund days, finding out what they are investing in, plus seeing their top analysis, has been very helpful to me.

CL: And how do you know which investors and funds to follow for this strategy? What criteria do you look for?

JA: I look for investors who have great track records. Ones who have survived upturns and downturns. Ones who have survived bubbles and crashes. And ones who hold on to stocks for the long term. I don’t want to have to look at stocks every day, so it’s a must for me that the hedge funds hold for the long term.

How will I know they are in it for the long term?

In some cases, like Buffett, they are so large (Buffett has $50 billion to invest) that it doesn’t make sense for them to have a short time frame. In some sense, that’s the one huge advantage we as average investors have over someone like Buffett: We can be nimble.

Another way to know these investors are in it to stay is if they are activists. By that, I mean whether they are vocal about changes they want in the company, they go on the board of directors, or install a new CEO, etc.

If you track 13D filings with the SEC, you can see some of these activist funds. But I have the extra help that I am usually only one or two degrees of separation from all of these funds and can follow them more closely. I can also find out the “why” behind their investments. This, again, allows me to be more nimble than them.

CL: Could you give me an example of someone on your list?

JA: Well, I already mentioned Warren Buffett. There are also guys like Dan Loeb, Carl Icahn, George Soros, David Tepper, Ken Griffin, Zeke Ashton, Mohnish Pabrai (the last two I even interviewed for the book I wrote on Warren Buffett), Bill Ackman, and several who have asked me not to name them.

CL: Is this strategy something you follow for your own portfolio?

JA: Yes. Although right now I will be focusing on the picks for my new investment advisory more than my own portfolio.

It’s a very exciting time. The newsletter builds on the strategy I’ve spent the last 20 years developing. And it’s doing really well. People are thrilled to be able to make the same types of profitable long-term investments that the Wall Street guys are making.

CL: You wrote a book, The Forever Portfolio, based on this strategy. It came out right at the bottom of the 2008 crash. How have the investments you recommended in that book worked out?

JA: I know the researchers at Choose Yourself Media have figured it out exactly. I believe I almost doubled the return of both the Dow Jones Industrial Average and Warren Buffett.

CL: Do you have an example of stocks you’ve found more recently using this strategy?

JA: We just the other day released an alert. It highlights HHC, the Howard Hughes Corporation.

Such an exciting story given the history of Howard Hughes and his immense empire. The real estate arm of that empire has floated from company to company until finally spinning off into its very own company.

I got really excited about this when I started to see some of the analysis coming out of the hedge funds that are involved in it.

For instance, I live near Pier 17 in New York City – South Street Seaport’s mall. I used to day-trade and then eat lunch there every day.

Who knew that HHC owned it?

But guess what? They value the entire property – a shopping mall on the edge of one of the most popular tourist attractions in New York City – at just $3 million.

As someone who lives in the area, let me tell you… you’d have trouble buying a one-bedroom apartment for less than $3 million around there.

And the more I looked, the more I saw that was how they were valuing their entire book. I’m really grateful for the contacts and connections that put this stock in front of me. Again: The key is to stand next to the smartest people in the room.

CL: So, the idea is to plug the average investor into what these heavy hitters are buying and what they’re selling? How do you get access to that kind of information?

JA: Hedge funds I knew…

Hedge funds I invested in… (I’ve invested in about 30 different hedge funds in the last 12 years.)

The hundreds of hedge funds I did due diligence on…

The heads of hedge funds who I’m still friends with and are just one call away…

The bankers and allocators to hedge funds that I’ve remained friends with and often exchange ideas with…

CL: Are there any big trends on your radar right now that you believe will be profitable over the next, say, five to ten years?

JA: That’s what is so exciting. We can all worry about governments and currencies and interest rates, etc. I agree these are things worth thinking about.

But much bigger are the tidal waves that are about to hit: synthetic biology, robotics, AI, drones, 3-D printing, biotech/genomics, etc.

Through top investors like Peter Thiel (who was the first investor in Facebook), Mark Cuban, Peter Diamandis (who has written two bestselling books on these trends), and many others, I’m again really grateful to know people I can call when I want to learn more.

My ideal investment opportunity is when I see deep-value situations occurring within one of those tidal wave trends. It doesn’t always happen, but it will.

I’m also happy looking at special situations that occur because every now and then the market, or particular stocks, become very irrationally priced.

CL: If you could pass on one piece of advice to readers about how to successfully build and preserve wealth over time, what would it be?

JA: Always stand next to the smartest person in the room.