Sign up  |  Log in

Would you blindly follow Buffet's investment portfolio?

Serious question - 

If you could not be bothered to do the individual company research and wanted to passively invest in a few single stocks would anyone just take a look at Buffet’s top holdings (released on his shareholder letters) and just buy into them? Buffet, as we know, only invests in companies with long term real wealth building capabilities regardless of short term price fluctuations. Would you ever just take that list and suggest if one of the most legendary stock pickers likes it, its good enough for me.

.....woof

Automate your Excel models with the industry's most accurate financial, market and economic data.

I guess. It’s kind of like just buying a value index fund or something though. You will be exposed to additional company risk too, like if Warren dies or something. It probably won’t affect the company’s strategy that much, but it could have an effect on their ability to market deals and attract capital, which is one of Berkshire’s major advantages. 

“Visit the Water Cooler forum on Analyst Forum. It is the best forum.”
- Everyone

Thanks Ohai,

 I guess my point is if i’m looking for long term companies that will be solid buys and I cant trust the worlds best stock picker due diligence, I certainly cant trust my own (at least in large caps where it is so internationally efficient) - As we go down market cap categories I could back myself to find better and better deals.

.....woof

caveat: Buffet is not necessarily the worlds best stock picker as I mentioned above - I’m more referencing his general legendary ability to be right quite often on long term buy and holds.

.....woof

Short answer is no.  When we look at Buffet’s holding, it doesn’t mean he is buying the public equity of those companies.  He is a big stakeholder in those company (could be equity/debt or both).  He is a big stake holder of one of the largest US bank by owning its debt (preferred equity), that bank’s publicly traded stocks are lagged overall market, but his preferred holding is paying off nicely.  Point is that just because Buffett owns XYZ, it doesn’t mean you can I can get the same deal with XYZ.

Also buffet experiences long periods of under performance and large draw downs. You probably wouldn’t keep faith through those periods. 

However I’ve seen some studies that  buy Buffet, klarman  and others investments. That seems to outperform as well while reducing the manager risk somewhat

Why don’t you just buy Berkshire? 

Yes, indeed, you cannot actually replicate Berkshire’s positions. When GS is in distress, they are not going to offer to sell you preferred stock yielding 8%, or buy 10y SPX puts from you with no collateral. This is special Warren Buffet powers, from his name and large balance sheet, not stock picking. If you want this stuff, you just have to buy BRK B shares, but you’re probably paying for some magic dust in there, not just book value of assets. 

“Visit the Water Cooler forum on Analyst Forum. It is the best forum.”
- Everyone

Sure but your returns are going to depend on what price you buy in at.  Actually I guess any investment will be good at the right price. If you can’t be bothered, either buy an index or BRK.

not a good idea to just buy his listed securities for many reasons:

1. majority of assets are private cos. if we look at overall assets, its prolly like 20% cash, 35% listed equities, 45% private co. so for example you might say oh he has a 10% position on axp, but really its like 3%.

2. majority of his listed equities, has a lot of gain embedded in them. he literally has 100b in gain. he has to factor that in when deciding to buy or sell. used to be a 35% tax now a 20% so about a $20b of 170b. which means that whatever he buys has to appreciate by at least 20b + the potential gain of the investment, lets call it 8%, so around 13b. so 33b minimum gain in a year over 150b (his net portfolio after liquidation), or a 22% annual return!

3.there are frictional costs if he were to sell due to the percentage of his ownership. so say he own 15% of the company,  but the daily volume of a stock is prolly like 0.5% of total market cap. if lets say he does 10% of the daily volume that’s 0.05%. that’s 300 trading days. lol, sumone going to know. so they are not super liquid!

4. the companies he owns are pretty overvalued if not fairly valued. buffett buys them when they are cheap, then heavily promotes them.  and thats part of the buffett magic or icahn effect. insert name blah blah. look at the cos taht he owns, and check their financials, do these look like wonderful companies? they were prolly wonderful 30 years ago is what im saying but consumer tastes have significantly changed!

5. lastly due to amount of money he has, he will not be paying attention to tiny cos. he can only focus on extremely large cos. he has even mentioned that full acquisitions need to be at a value of 5b to 20b, which is prolly 1% to 3% of his overall portfolio. so you literally have to be a legit mid cap co. so that’s prolly like 20% of all cos out there. he doesnt want to focus on the other 80% cuz of lack of impact they can contribute.

I love my cheese. I got to have my cheddar.

guys thanks v much for the info.

My original question was in reference to his large liquid holdings (Apple, Wells Fargo, AMEX) etc. He argues that taking positions in solid companies will be reflected in improved share price. That was more what I was getting at. I was not thinking of his small companies that he has stakes in but the major players he holds shares of.

However, you are indeed correct that some of his holding periods on these stocks have been a long time and therefore getting in now as a retail investor is not the same, after having missed notable upside. Just because he still holds the shares now does not necessarily mean it is a buying opportunity 

Going via Berk B class is definitely a way to do it, but was thinking of more getting the underlying exposure to stocks Berk hold.

Thanks for the answers! 

.....woof

rexthedog wrote:

guys thanks v much for the info.

My original question was in reference to his large liquid holdings (Apple, Wells Fargo, AMEX) etc. He argues that taking positions in solid companies will be reflected in improved share price. That was more what I was getting at. I was not thinking of his small companies that he has stakes in but the major players he holds shares of.

again, due to the amount of large buying power he has, when he is talking about taking “positions” in solid companies, those “postings” (size, where it sits in capital structure, discount/premium, control) are hard/if not impossible for you and I to achieve.

Nope, Buffet is last century. His American-centric thinking is yesterday.

to be fair there is a domestic bias everywhere. not just the us. we just have the most assets

I love my cheese. I got to have my cheddar.

Never trust anyone. Use educated guess as to the sector, region, small cap,large cap etc but when it comes to picking actual stocks always use darts.

pffft