GuruFocus offers several value-investing strategies that have outperformed the S&P 500 benchmark throughout the past eight years. Three such strategies include the Undervalued Predictable Strategy, the Buffett-Munger Strategy and the Most Broadly Held Strategy.
Three investing strategies, three ways to unlock value
Berkshire Hathaway Inc. (BRK.A)(BRK.B) managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio) reminded us of key investing criteria for good companies, including predictable earnings growth and expanding operating margins. As of Jan. 26, one company that meets both of the above criteria is McKesson Corp. (MCK, Financial), as illustrated in the charts below. Figure 1 shows McKesson’s predictability chart while Figure 2 shows McKesson’s margin trends over the past 10 years.
Figure 1: McKesson’s Predictability Chart (Predictability rank: 4)
Figure 2: McKesson’s Historical Operating and Net Margins: Past 10 Years
Both the Undervalued Predictable and Buffett-Munger strategies invest in high-quality companies at fair prices. As of Jan. 26, the two value strategies have returned 288.89% and 217.93% since their Dec. 31, 2008 inception, as illustrated in Figure 3.
Figure 3
An alternative strategy is to invest in the most broadly held companies, companies with the highest number of guru owners. As of Jan. 26, the Most Broadly Held strategy has returned 204.57% since its Dec. 31, 2005 inception, as illustrated in Figure 4.
Figure 4
Good companies offer good value potential
Table 1 lists the companies that are in both the Undervalued Predictable and Buffett-Munger model portfolios. For each company, the model portfolio performance gain represents the total gain since the stock was added to the portfolio.
| Company | Price ($) | Undervalued-Predictable Model Portfolio Performance | Buffett-Munger Model Portfolio Performance |
| Express Scripts Holding Co. (ESRX, Financial) | 81.13 | 8.70% | 8.70% |
| McKesson Corp. (MCK, Financial) | 177.22 | 26.18% | 13.64% |
| Amgen Inc. (AMGN, Financial) | 196.58 | 13.04% | 13.04% |
| BofI Holding Inc. (BOFI, Financial) | 33.68 | 17.97% | 12.64% |
| Dorman Products Inc. (DORM, Financial) | 75.09 | 22.82% | 22.82% |
| Ever-Glory International Group Inc. (EVK, Financial) | 2.6 | 10.64% | 10.64% |
| Gentex Corp. (GNTX, Financial) | 23.66 | 12.94% | 12.94% |
| Hingham Institution for Savings (HIFS, Financial) | 223.22 | 7.84% | 7.84% |
| Novo Nordisk A/S (NVO, Financial) | 58.03 | 61.82% | 61.82% |
| The Toronto-Dominion Bank (TD, Financial) | 60.15 | 2.68% | 2.68% |
| Usana Health Sciences Inc. (USNA, Financial) | 76.25 | 2.97% | 2.97% |
Table 1
Based on Table 1, the average gain per company is approximately 17.05% for the Undervalued Predictable strategy and 15.43% for the Buffett-Munger strategy.
See also
Table 2 shows the value screener record as of Jan. 26.
| Screener Name | USA | Canada | UK / Ireland | Europe | Asia | Oceania | Latin America | Africa |
| Ben Graham Net-Net | 192 | 78 | 50 | 206 | 547 | 35 | 1 | 9 |
| Undervalued Predictable | 46 | 7 | 23 | 63 | 38 | 1 | 19 | 5 |
| Buffett-Munger | 34 | 8 | 11 | 42 | 65 | 2 | 12 | 4 |
| Historical Low Price-Sales | 21 | 1 | 7 | 16 | 37 | 0 | 8 | 4 |
| Historical Low Price-Book | 30 | 0 | 12 | 24 | 58 | 0 | 11 | 7 |
| Peter Lynch Growth | 38 | 5 | 12 | 41 | 63 | 2 | 12 | 6 |
| Walter Schloss | 21 | 17 | 40 | 84 | 286 | 13 | 8 | 5 |
Table 2
GuruFocus Premium members can view the list of companies for each value screener. You can also expand your data coverage to view the list of companies for additional regions.
Key features for Premium Plus members include backtesting of strategies generated by the All-in-one Guru Screener up to 2006 (U.S. companies only) and the Manual of Stocks for all companies subscribed to. Premium Plus members also get unlimited Excel Add-in queries and up to 20,000 API queries per month for deeper research and programming.
Disclosure: I do not have positions in the stocks mentioned.
