If you want to invest in GuruFocus Value Strategies, it is time to get prepared. GuruFocus Value Strategies have again had solid performance in 2012. The detailed performance numbers are below:
|Year||S&P 500||Buffett-Munger Screener top 25||Top 25 Undervalued Predictable Companies||Top 25 Historical Low P/S Ratio Companies||Top 25 Historical Low P/B Ratio Companies|
|Outperforming the S&P||24.3%||29.8%||9.7%||6.9%|
The Buffett-Munger portfolio has outperformed the market in 2009, 2010 and 2011. It underperformed slightly this year, by about 1.8% so far. Over the past four years, the strategy has outperformed the S&P 500 by 24.3%. Proven value strategies such as investing in companies that are sold at historical low P/S ratio and P/B ratios beat the S&P 500 by 4.5% this year, averaging 3% of outperformance per year since inception.
All the stocks in GuruFocus Value Strategies are selected from companies with high Business Predictability Rank. These companies have grown their revenue and earnings consistently for at least 10 years. These strategies reflect our strong belief that buying good companies at reasonable prices is the best investing approach. This is what we have learned from Warren Buffett and other investment Gurus over the years.
In addition, the Buffett-Munger strategy screens for the companies that have long-term moat, that is, those can grow consistently without compromising their profit margins and incurring more debt. We believe that these companies are “good companies at fair prices,” the companies you can buy and hold for the long term.
Investing in GuruFocus Value Strategies is a relatively passive way of investing in high-quality companies at reasonable prices. The strategies will outperform index investing over time. If you ever thought of investing in GuruFocus Value Strategies, now it is the best time to get started.
These are some FAQs we received from interested users:
1. How many stocks should I invest in GuruFocus Value Stratgies?
We recommend 25 stocks in the portfolio. Twenty-five stocks are reasonably diversified to mitigate business risk of individual stocks, but enough to take advantage of the systematic outperformance of the strategies.
2. What is the recommended minimum investment in USD for Buffet-Munger portfolio?
There is no actual minimum amount required. But we recommend that the portfolio needs to be large enough so that trading cost is less than 1% of the total portfolio.
3. How often are model portfolios rebalanced?
The portfolio is rebalanced once a year, at the beginning of the new year.
4. How much is the portfolio turnover historically?
Historically the portfolio turnover is about 50% per year.
5. The portfolio has been in place for several years. Can I start now?
You can start any time. The way to get started is to buy the top-ranked 25 stocks in the Value Strategies. The positions are equal weighted.
6. Can we apply this strategy to both tax-deferred and taxable accounts? Although it seems to better suit taxable accounts, it is relatively tax efficient as well.
It works for both tax-deferred and taxable accounts. In the taxable accounts, you can sell the losers that are ranked out before the year-end to take the tax loss.
7. How do I adjust weightings of the positions at rebalance?
Don’t trade any of the stocks that are still in the portfolio during rebalance. Sell those that are ranked out. Buy the new stocks equal weighted with the fund that are from the sales.
8. How do I add new money?
Buy the 25 stocks that are in the portfolio and keep the weighting unchanged.
9. Do we need to check for these signals constantly?
No. You are buying good companies at reasonable prices. You can sleep well.
10. If the market crashes, will GuruFocus Value Strategies lose money, too?
Very likely. But we believe that GuruFocus Value Strategies will hold better than the market.
11. Will GuruFocus Value Strategy outperform the market every year?
Unlikely. We don’t believe that any strategy can outperform the market every year. But we do believe that these value strategies will outperform significantly over time. The portfolio carries a smaller risk than the general stock market.
These Value Strategies tend to outperform much more when the market is undervalued.
12. Do people at GuruFocus invest in these model portfolios?
Yes. GuruFocus founder Dr. Charlie Tian puts his own money in Buffett-Munger Strategy. If you want to know how Charlie thinks, read A Message from Charlie.
Again if you want to invest with GuruFocus Value Strategy, now it is the best time. We are getting ready for the rebalance of the portfolios. An email alert will be sent to you on the day of the rebalance.
GuruFocus Premium Membership is required to gain access these strategies. If you are not a Premium Member, we invite you for a 7-day Free Trial.
About the author:
Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of The Little Book of Sideways Markets (Wiley, December 2010). To receive Vitaliy’s future articles by email or read his articles click here.
Investment Management Associates Inc. is a value investing firm based in Denver, Colorado. Its main focus is on growing and preserving wealth for private investors and institutions while adhering to a disciplined value investment process, as detailed in Vitaliy’s book Active Value Investing (Wiley, 2007).