In the recent five years, the S&P 500 gained 24.71% in 2009, 11.65% in 2010, 0% in 2011, 12.1% in 2012, and 16.92% year to date. The market performance looks good. Could investors make more money by investing in GuruFocus Model Portfolios? It is time to check the performance. The following are the details of the performanceof the four value strategies:
Value Strategies (Long):
* All numbers do not include dividends.
In the first eight months of 2013, we can see that the performances of these four model portfolios are about even with S&P 500. Since inception of each model portfolio, they all outperformed the market.
Without any doubt, Warren Buffett’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 "Buffett-Munger Screener,"which helps to find companies with high quality business at undervalued or fair-valued prices:
From the above performance figure, GuruFocus can be proud to say that Buffett-Munger Screener Top 25 outperformed the market almost every year except in 2012. Even the only underperformance was small compared to the stock market. In all, since inception, Buffett-Munger Screener Top 25 outperformed the S&P 500 by 28.94%. The portfolio of Top 25 Undervalued Predictable Companies outperformed the market for 35.75%, even higher than the Buffett-Munger Screener.
Both Buffett-Munger Screener and Top 25 Undervalued Predictable Companies select stocks from the companies that have the highest predictability rank. 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 and 2012, but were about even with the market year to date. Please go to historical low P/B ratios and historical low P/S 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 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 the 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 access the details of the portfolios and screeners. We also publish a monthly Buffett-Munger newsletter which features the picks from 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.
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% | ||
| 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 | 16.92% | 16.83% | 16.05% | 15.08% | 16.57% |
| Since | Inception | 111.44% | 118.25% | 56.19% | 55.04% |
| Outperforming | the S&P | 28.94% | 35.75% | 9.85% | 8.7% |
| Screener | Links | Screener Here | Screener Here | Screener Here | Screener Here |
* All numbers do not include dividends.
In the first eight months of 2013, we can see that the performances of these four model portfolios are about even with S&P 500. Since inception of each model portfolio, they all outperformed the market.
Without any doubt, Warren Buffett’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 "Buffett-Munger Screener,"which helps to find companies with high quality business at undervalued or fair-valued prices:
1. Companies that have high Predictability Rank , that is, companies that can consistently grow their revenue and earnings.Both of the portfolios of Buffett-Munger Screener Top 25 and Top 25 Undervalued Predictable Companieswere started in January 2009. In 2009, Top 25 Undervalued Predictable Companies gained 55.72%, double the return of S&P 500. In 2010, both two models outperformed the market by around 9%. In 2011, the market was even, yet the Buffett-Munger Screener top 25 outperformed the market by 6.01%. In 2012 and 2013, the Buffett-Munger Screener top 25 was about even with the S&P 500, while the Top 25 Undervalued Predictable Companies slightly underperformed the market in 2012.
2. Companies that have competitive advantages. It can maintain or even expand its profit margin while growing its business.
3. Companies that incur little debt while growing business
4. 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.
From the above performance figure, GuruFocus can be proud to say that Buffett-Munger Screener Top 25 outperformed the market almost every year except in 2012. Even the only underperformance was small compared to the stock market. In all, since inception, Buffett-Munger Screener Top 25 outperformed the S&P 500 by 28.94%. The portfolio of Top 25 Undervalued Predictable Companies outperformed the market for 35.75%, even higher than the Buffett-Munger Screener.
Both Buffett-Munger Screener and Top 25 Undervalued Predictable Companies select stocks from the companies that have the highest predictability rank. 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 and 2012, but were about even with the market year to date. Please go to historical low P/B ratios and historical low P/S 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 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 the 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 access the details of the portfolios and screeners. We also publish a monthly Buffett-Munger newsletter which features the picks from 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.
