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5 ETF Strategies to Follow Warren Buffett's Vision

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Billionaire investor Warren Buffett is famous for his incredible investment ideas. If you an ardent follower of the investment guru Warren Buffett, you might find his latest suggestions intriguing.

Normally, Buffett takes interest in companies trading below what he believes is their intrinsic value. He aims for long-term outperformance and apparently ignores short-term downturns.

With COVID-19 bringing about a sea-change in the global investment backdrop, many are waiting for the predictions from the Oracle of Omaha regarding what lies ahead. Here are some takeaways from Berkshire Hathaway Inc.’s annual meeting held last week.

Strong Inflation in the Cards?

Warren Buffett is among the market watchers who see considerable levels of inflation beginning to take root in the U.S. economy. Prolonged easy money, fiscal stimulus and faster recovery from the COVID-induced slump have made this possible (read: U.S. Inflation Hits More Than 2-Year High: ETFs & Stocks to Win).

Buffett also indicated that much higher steel costs are impacting Berkshire's housing and furniture businesses. Raw materials, transportation and labor costs will likely drive inflation, per several market strategists.

Against this backdrop, betting on industrial metal ETFs like iPath Series B Bloomberg Industrial Metals Subindex Total Return ETN (JJM - Free Report) and Invesco DB Base Metals Fund (DBB) would be lucrative ideas. ProShares Inflation Expectations ETF (RINF) and Horizon Kinetics Inflation Beneficiaries ETF (INFL) are two other ETFs to play the trend (read: 4 ETFs to Play Rising Inflationary Pressures).

S&P 500 Will Continue Its Uphill March?

Buffett thinks that “the best thing to do is buy 90% in an S&P 500 index fund.” And why not? With the U.S. economy logging the best period for GDP in the first quarter since the third quarter of 2003 (apart from the reopening-driven third-quarter jump last year) and vaccination gathering steam, we expect the rally in the S&P 500 to continue in the coming days. ETFs like SPDR S&P 500 ETF (SPY - Free Report) give exposure to blend stocks (a mix of growth and value).

While a solid pickup in broad-based economic growth and an accommodative monetary policy bode well for growth stocks across all spectrums, continued optimism would boost bond yields to some extent, giving a boost to the value corner of the market. So, the S&P 500 would give you a broader and diversified exposure (read: ETF Areas to Win on Smashing Q1 U.S. GDP Growth).

Bet on Banks

Buffett said he still likes banks “generally,” but wanted to reduce Berkshire’s exposure to the “possible risk” (amid COVID-19) that he now confesses did not fully arrive. Banks are also better positioned as strong household savings ruled out the fear of delinquencies or default on loans in the banking sector. In any case, banking is an undervalued sector currently. Earnings have been upbeat in the sector. A prospective rising rate environment is another plus for the banking stocks. SPDR S&P Bank ETF (KBE - Free Report) is thus a good bet (read: Banking Earnings Upbeat: Time to Buy Financial ETFs on Value?).

Was Buffett’s Airlines Selloff a Mistake? Bet on it Now

Warren Buffett accepted that a better-than-expected economic recovery from the pandemic led him to offload some airline stocks that were possibly unprofitable. Last year, at this time of the year, Berkshire has said that it has offloaded all $4 billion worth of its airline stocks. The “world has changed for airlines” Buffett had said because of the effect of coronavirus.

Since then, in the past year, US Global Jets ETF (JETS - Free Report) has jumped about 93% and is up about 20% this year. The reopening trade help the sector make a strong bounce-back. Hence, one can place bets on airlines ETF now with Buffett appearing to have a different view on the economy and the industry.

Time to Buy Chevron for the Long Term?

Warren Buffett ruled out environmental concerns over the company's $4.1 billion stake in Chevron (CVX - Free Report) , saying the oil giant benefits society and is disapproving of supporters on either extreme of corporate sustainability. "Chevron is not an evil company in the least and I have no compunction about owning Chevron," Buffett said. Investors who share the same view with Buffett can bet on Chevron-heavy ETFs like Energy Select Sector SPDR Fund (XLE) and iShares U.S. Energy ETF (IYE - Free Report) .

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