Can we achieve outstanding gains by buying the stocks that Gurus are betting heavily on? We try to answer this question.
This is the second article in the series that we study the strategies on how to use Gurus’ ideas to achieve outstanding gains over long term. This study is for the Most Weighted Portfolio, which has returned 26.5% since incepted in Jan. 2006.
The Most Weighted Portfolio consists of the top 25 stocks with the highest combined weightings in the aggregated portfolios of Gurus. The combined weightings are defined as the total of the positions of a stock in Gurus’ portfolio. For instance: if Guru A holds 17% of WMT in his holding, and Guru B holds 5%, and Guru C holds 4%. The combined weighting of WMT is defined as 17+5+4=26. The portfolio is rebalanced once every 12 months. The last rebalance was Jan. 4, 2007.
The Most Weighted Portfolio did well in 2006, gained more than 22% without including the dividends. There is only 1 loser among the 25 stocks, which is Progressive Insurance (PGR). During the rebalance, 7 out of the 25 stocks are replaced. The ranking is based on the Gurus portfolio at the end of the third quarter. Among the new positions in the portfolio, Canadian Natural Resources (CNQ, Financial) is owned by Bruce Berkowitz with 17% of weighting. Dell (DELL, Financial) is owned 9 Gurus with 17% of combined weighting. Home Depot is owned by 8 Gurus with a combined weighting of 22%.Microsoft (MSFT, Financial), Mohawk Industries Inc. (MHK, Financial), Liberty Media Holding Corporation (LINTA, Financial), Unitedhealth Group Inc. (UNH, Financial), which is also a new position of Warren Buffett. Overall, the portfolio turnover was 28%.
Most Weighted Portfolio continues to perform well. Year to date it gained 3.93% without counting dividends, slightly outperformed S&P500’s 3.83%.
Since the most weighted stocks are the ones Gurus bet most heavily on. We have reasons to believe that the portfolio will perform well with low turnovers. However, some of the positions have had substantial gains, they may not be undervalued any more. For instance, Comcast (CMCSK, Financial) has gained more than 58% in the portfolio, EchoStar Communications Corp. (DISH, Financial) has gained 64.22%, and News Corp. (NWS-A) has gained more than 50%. Their stocks may be overvalued, as Gurus are reducing their holdings now. For the model portfolio, we will continue to hold them until the next rebalance, which will be in Jan. 2008.
What do we learn from this? When we look at the Gurus stock picks, we need to pay attention to how much money do they commit to this position. This is called “Impact to Portfolio” in the page of Gurus’ stock picks. For instance, Warren Buffett’s stock picks are here: http://www.gurufocus.com/StockBuy.php?action=buy&GuruName=Warren+Buffett
To see the current Aggregated Portfolio and the most weighted stocks, Premium Members can go to here. If you are not a Premium Members we invite you for a 7-day Free Trial.
This is the second article in the series that we study the strategies on how to use Gurus’ ideas to achieve outstanding gains over long term. This study is for the Most Weighted Portfolio, which has returned 26.5% since incepted in Jan. 2006.
The Most Weighted Portfolio consists of the top 25 stocks with the highest combined weightings in the aggregated portfolios of Gurus. The combined weightings are defined as the total of the positions of a stock in Gurus’ portfolio. For instance: if Guru A holds 17% of WMT in his holding, and Guru B holds 5%, and Guru C holds 4%. The combined weighting of WMT is defined as 17+5+4=26. The portfolio is rebalanced once every 12 months. The last rebalance was Jan. 4, 2007.
The Most Weighted Portfolio did well in 2006, gained more than 22% without including the dividends. There is only 1 loser among the 25 stocks, which is Progressive Insurance (PGR). During the rebalance, 7 out of the 25 stocks are replaced. The ranking is based on the Gurus portfolio at the end of the third quarter. Among the new positions in the portfolio, Canadian Natural Resources (CNQ, Financial) is owned by Bruce Berkowitz with 17% of weighting. Dell (DELL, Financial) is owned 9 Gurus with 17% of combined weighting. Home Depot is owned by 8 Gurus with a combined weighting of 22%.Microsoft (MSFT, Financial), Mohawk Industries Inc. (MHK, Financial), Liberty Media Holding Corporation (LINTA, Financial), Unitedhealth Group Inc. (UNH, Financial), which is also a new position of Warren Buffett. Overall, the portfolio turnover was 28%.
Most Weighted Portfolio continues to perform well. Year to date it gained 3.93% without counting dividends, slightly outperformed S&P500’s 3.83%.
Since the most weighted stocks are the ones Gurus bet most heavily on. We have reasons to believe that the portfolio will perform well with low turnovers. However, some of the positions have had substantial gains, they may not be undervalued any more. For instance, Comcast (CMCSK, Financial) has gained more than 58% in the portfolio, EchoStar Communications Corp. (DISH, Financial) has gained 64.22%, and News Corp. (NWS-A) has gained more than 50%. Their stocks may be overvalued, as Gurus are reducing their holdings now. For the model portfolio, we will continue to hold them until the next rebalance, which will be in Jan. 2008.
What do we learn from this? When we look at the Gurus stock picks, we need to pay attention to how much money do they commit to this position. This is called “Impact to Portfolio” in the page of Gurus’ stock picks. For instance, Warren Buffett’s stock picks are here: http://www.gurufocus.com/StockBuy.php?action=buy&GuruName=Warren+Buffett
To see the current Aggregated Portfolio and the most weighted stocks, Premium Members can go to here. If you are not a Premium Members we invite you for a 7-day Free Trial.
