Warren Buffett recommended the Sequoia Fund (SEQUX) when it opened in 1970, and that proved to be a smart call. The fund’s performance beat the U.S. stock market over the past four decades, in part because it had a lot of its money in Buffett’s diversified and highly regarded company, Berkshire Hathaway (BRK.A, Financial). That all changed in 2010, after Buffett warned that Berkshire wouldn’t grow as fast as it once did. The managers of the $4 billion Sequoia Fund cut their reliance on the stock almost in half. That proved to be another smart call. Sequoia delivered a 13 percent return in 2011, better than 99 percent of its value-stock fund peers, according to data compiled by Bloomberg.
Like Buffett, Sequoia’s managers look for high-quality companies with competitive advantages, and they hold their investments for long periods. One crucial difference: While the scale of Buffett’s $68 billion stock portfolio forces him to buy mainly the largest companies, Sequoia is small enough to benefit from investments in midsize businesses. The fund beat 97 percent of peers over the past 10 and 15 years, according to research firm . From 1970 to 2010, the fund returned 14 percent annually, compared with 11 percent for the Standard & Poor’s 500-stock index. “They have the kind of portfolio Buffett might have if he ran a mutual fund,” says Steven Rogé, a portfolio manager with Bohemia (N.Y.)-based R.W. Rogé, which holds shares in Sequoia.
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Like Buffett, Sequoia’s managers look for high-quality companies with competitive advantages, and they hold their investments for long periods. One crucial difference: While the scale of Buffett’s $68 billion stock portfolio forces him to buy mainly the largest companies, Sequoia is small enough to benefit from investments in midsize businesses. The fund beat 97 percent of peers over the past 10 and 15 years, according to research firm . From 1970 to 2010, the fund returned 14 percent annually, compared with 11 percent for the Standard & Poor’s 500-stock index. “They have the kind of portfolio Buffett might have if he ran a mutual fund,” says Steven Rogé, a portfolio manager with Bohemia (N.Y.)-based R.W. Rogé, which holds shares in Sequoia.
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