In recent five years, the S&P 500 gained 24.71% in 2009, 11.65% in 2010, 0% in 2011, 12.1% in 2012, and 31.8% in 2013. The market performance looks good. Could investors make more money by investing in GuruFocus Model Portfolios? It is time to check the performances. The following are the details of the performances of the four value strategies:
Value Strategies (Long):
| 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 |
| 2009 | 24.71% | 28.65% | 55.72% | Â | Â |
| 2010 | 11.65% | 19.54% | 20.17% | 19.05% | 16.39% |
| 2011 | -0% | 6.01% | -3.32% | -2.01% | -1.87% |
| 2012 | 12.1% | 11.01% | 3.95% | 16.34% | 16.45% |
| 2013 | 31.8% | 30.37% | 24.81% | 29.60% | 33.18% |
| 2014 | 1.77 % | 2.19% | 1.93% | 8.18% | 9.3% |
| Since | Inception | 141.11% | 139.25% | 90.28% | 93.6% |
| Outperforming | the S&P | 31.75% | 29.89% | 22.4% | 25.72% |
| Screener | Links | Screener Here | Screener Here | Screener Here | Screener Here |
* All numbers do not include dividends.
The U.S. stock market had an excellent 2013. The market benchmark S&P 500 went up 31.8%, which is the highest since the financial crisis. Our portfolio of Top 25 Historical Low P/B Ratio Companies even outperformed the S&P 500 by 1.38%.
In 2014, even though the market benchmark S&P 500 went down in April, all of our four portfolios went up. The portfolio of historical low P/S stocks beat the market benchmark S&P 500 by 6.41%, while the portfolio of historical low P/B ratios beat the market benchmark S&P 500 by 7.53%. The portfolio of Buffett-Munger Screener Top 25 stocks outperformed the market benchmark S&P 500 by 0.42%, and the portfolio of Top 25 Undervalued Predictable Companiesoutperformed the market benchmark S&P 500 by 0.16%.
Both of the portfolios of the Buffett-Munger Screener Top 25 and Top 25 Undervalued Predictable Companies were started in January 2009. In 2009 and 2010, the Buffett-Munger Screener outperformed the market by around 4% and 8%. In 2011, the market was even, yet Buffett-Munger Screener outperformed the market by 6.01%. In 2012 and 2013, the Buffett-Munger Screener was about even with the S&P 500. In 2014, it has outperformed the market by 0.42%. From the above performance figure, GuruFocus can be proud to say that the Buffett-Munger Screener Top 25 portfolio outperformed the market almost every year.
Regarding the Top 25 Undervalued Predictable Companies, the portfolio gained 55.72% and 20.17%, respectively, in 2009 and 2010, almost double the return of the S&P 500 in that period. However, from 2011 to 2013, the portfolio of Top 25 Undervalued Predictable Companies underperformed the market. In 2014, it was about even with the S&P 500. In all, since inception, the Buffett-Munger Screener Top 25 outperformed the S&P 500 by 31.75%. The portfolio of Top 25 Undervalued Predictable Companies outperformed the market by 29.89%.
Without any doubt, Warren Buffett (Trades, Portfolio)’s investment strategy is the most successful ever. He believes that to buy companies with “predictable and proven” earnings can be very profitable in stock market investing. Based on his strategy, GuruFocus develops the "Buffett-Munger Screener," which helps to find companies with high quality business at undervalued or fair-valued prices:
- Companies that have high Predictability Rank, that is, companies that can consistently grow their revenue and earnings.
- Companies that have competitive advantages, or can maintain or even expand their profit margin while growing their business.
- Companies that incur little debt while growing business.
- Companies that are fair valued or under-valued. We use PEPG as indicator. PEPG is the P/E ratio divided by the average growth rate of EBITDA over the past five years.
Both Buffett-Munger Screener and Top 25 Undervalued Predictable Companies select stocks from the companies that have the highest predictability rank. The Top 25 Undervalued Predictable Companies Portfolio selects the stocks that are undervalued from DCF calculations. For the current list of undervalued predictable companies, go to the screener. For the current list of good companies at fair or undervalued prices for the Buffett-Munger screener, click here.
The other two model portfolios are for predictable companies that are traded at historical low P/S and historical low P/B ratios, respectively. Both of these two portfolios outperformed the market average in 2010, 2012 and 2014, but were about even with the market in 2011. The portfolio of historical low P/B ratios outperformed the market by 1.38% in 2013, while the portfolio of historical low P/S ratios slightly underperformed the S&P 500 by 2.2% in 2013. In all, since inception, the historical low P/S portfolio outperformed the S&P 500 by 22.4%. The portfolio of historical low P/B ratios outperformed the S&P 500 by 25.72%. Please go to historical low P/S ratios and historical low P/B ratios for the complete stock lists.
All the portfolios are rebalanced once a year; therefore, no portfolio changes will be made at this time.
From the above analysis, we can see for a single year, the performance of our portfolios may not beat the market, yet in the long run, it is profitable to invest using our model portfolios.
This is the summary of the four value strategies mentioned above:
1. Buffett-Munger screener: Invests in predictable companies that have low debt, consistent profit margin, and are traded at low PE to growth ratios.
2. Undervalued Predictable Companies: Invests in predictable companies that are undervalued based on DCF model.
3. Historical low P/S: Companies that have high predictability rank, but are traded at historical low P/S ratios.
4. Historical low P/B: Companies that have high predictability rank, but are traded at historical low P/B ratios.
GuruFocus premium membership is needed to gain access to the details of the portfolios and screeners. We also publish a monthly Buffett-Munger newsletter which features the picks from the Buffett-Munger Screener. If you are a premium member, you can download this for free. If you are not a Premium Member, we invite you for a 7-day Free Trial.
