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Buffett-Munger Model Portfolio Shows Great Resilience in Market Downturns
Posted by: GuruFocus (IP Logged)
Date: May 18, 2012 09:16AM

As the stock market quickly gave up most of its gains of this year since the beginning of May, GuruFocus model portfolio of Buffett-Munger strategy shows great resilience. Up to the market close today, Buffett-Munger model portfolio gained 8.8% year to date, outperforming the S&P 500 by 5%.

GuruFocus monitors the performances of four value strategies. Their performances are updated daily in the value ideas page. As of this year, Undervalue Predictable Companies portfolio lost 3%, underperforming the market by 6.8%. The historical low P/S portfolio and the historical P/B portfolio are slightly better than the S&P 500. Since inception, all model portfolios outperformed the S&P 500.

Among all value strategies, Buffett-Munger strategy has shown very consistent performance. It has beaten the S&P 500 every year since incepted in Jan. 2009, outperforming by 32.7% cumulatively. As a comparison, the Undervalue Predictable Companies has similar overall outperformance so far. But the portfolio has higher volatility. By the end of April, the portfolio has doubled since Jan. 2012. It has since given up some of its gains.

Buffett-Munger strategy invests in companies with high Predictability Rank, but carries no extra debt while growing, and can maintain or even expand its profit margin over time. We believe that these are the companies that younger Warren Buffett would buy. These companies’ competitive advantages can keep it from margin decline over time. They are traded at reasonable valuations. You can check out the current list of stocks in the screen here. The high quality and reasonable valuation helped reduced the stock declines during market downturns. These are the companies you want to buy and hold forever.

For one time this year, the Buffett-Munger strategy underperformed the S&P 500 slightly as the market runs up quickly. But since the market decline started in May, by holding companies such as Wal-Mart (WMT), Factset (FDS), Waters (WATT), the portfolio has withstand the market storm well.

You can check out the details of the Buffett-Munger portfolio here.



Stocks Discussed: WMT, WATT, FDS,
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