When an investor wants to imitate Warren Buffet, he can either buy individual stocks or he can build a Buffett-like portfolio with mutual funds.
Sometimes the funds do not exactly follow Buffett's strategy. For example, Third Avenue Value, under Martin J. Whitman, doesn’t. Others, to a certain extent, do — notably, Sequoia and Tweedy, Browne.
If the fund is not available to new investors, an investor interested in obtaining a share in it can ask a shareholder to sign over one share to him and use that share to obtain more. However, there is no evidence that Sequoia shareholders are interested in selling shares.
Now, which fund is similar to Berkshire? Undoubtedly, the most similar one is Sequoia. Indeed, it was set up by a very close friend of Buffett from the Columbia Business School and invests a large number of assets in Berkshire.
Sequoia was severely affected in 1999 jointly with Berkshire. However, it has been able to recover and now has a long-term record that is splendid. Actually, it has outperformed the S&P 500 by 2.31% points.
There are funds that resemble Sequoia. One of them that Buffett has reported is Clipper Fund, which follows Buffett's investing style.
There is another fund that is not widely known but has much in common with Berkshire. This fund is Vontobel U.S. Value, run by Edwin Walczak. He has confessed that he has been influenced by the super investor Buffett. His portfolio recently had a 5 percent exposure to Berkshire, its fifth largest position.
The question is how to search for other funds following Buffett´s strategy? The method is to compare their R-squared. It is a measure indicating how closely a fund follows an index. In other words, it shows a mutual fund´s performance vis-à -vis the entire market. For instance, a fund owning large-company stocks, both growth and value should have a high R-squared in relation to S&P 500 index. On the contrary, a fund buying small-company stocks usually has a low R-squared.
There are those who believe that this R-squared is not useful to identify Buffett-like mutual funds because some of those funds are not closely linked with S&P 500 index.
Funds generally differ from one another based on the method to assess what a company is worth. Some managers like Buffett turn to the current value of future cash flow. Others check what has been paid for similar companies recently taken over.
The stocks and mutual funds similar to Buffett's may be a portion of the portfolio. Why is that? Because sometimes value funds may underperform during long periods of time. In that case it is useful to have good growth stocks and mutual funds.
It is important to have a diversified and stable portfolio.
Sometimes the funds do not exactly follow Buffett's strategy. For example, Third Avenue Value, under Martin J. Whitman, doesn’t. Others, to a certain extent, do — notably, Sequoia and Tweedy, Browne.
If the fund is not available to new investors, an investor interested in obtaining a share in it can ask a shareholder to sign over one share to him and use that share to obtain more. However, there is no evidence that Sequoia shareholders are interested in selling shares.
Now, which fund is similar to Berkshire? Undoubtedly, the most similar one is Sequoia. Indeed, it was set up by a very close friend of Buffett from the Columbia Business School and invests a large number of assets in Berkshire.
Sequoia was severely affected in 1999 jointly with Berkshire. However, it has been able to recover and now has a long-term record that is splendid. Actually, it has outperformed the S&P 500 by 2.31% points.
There are funds that resemble Sequoia. One of them that Buffett has reported is Clipper Fund, which follows Buffett's investing style.
There is another fund that is not widely known but has much in common with Berkshire. This fund is Vontobel U.S. Value, run by Edwin Walczak. He has confessed that he has been influenced by the super investor Buffett. His portfolio recently had a 5 percent exposure to Berkshire, its fifth largest position.
The question is how to search for other funds following Buffett´s strategy? The method is to compare their R-squared. It is a measure indicating how closely a fund follows an index. In other words, it shows a mutual fund´s performance vis-à -vis the entire market. For instance, a fund owning large-company stocks, both growth and value should have a high R-squared in relation to S&P 500 index. On the contrary, a fund buying small-company stocks usually has a low R-squared.
There are those who believe that this R-squared is not useful to identify Buffett-like mutual funds because some of those funds are not closely linked with S&P 500 index.
Funds generally differ from one another based on the method to assess what a company is worth. Some managers like Buffett turn to the current value of future cash flow. Others check what has been paid for similar companies recently taken over.
The stocks and mutual funds similar to Buffett's may be a portion of the portfolio. Why is that? Because sometimes value funds may underperform during long periods of time. In that case it is useful to have good growth stocks and mutual funds.
It is important to have a diversified and stable portfolio.
