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Warren Buffett Wins in 2022: ETF Lessons to Learn From

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Billionaire investor Warren Buffett has turned a winner this year despite wild stock market gyrations. The world’s richest people including Elon Musk, Mark Zuckerberg, Jeff Bezos  and  Larry Page and Sergey Brin have seen their net worth nosediving in the first few weeks of 2022 — except for Warren Buffett.

Buffett is considered the guru of value investing. Banks, energy firms and other value stocks have rallied this year, boding well for Buffett. Against this backdrop, below we highlight a few ETF strategies that could be followed if you are a fan of Warren Buffet.

Buffet Loves Apple

Apple (AAPL - Free Report) is a key holding of Berkshire’s portfolio, making up more than 40% of Berkshire’s portfolio by market value. The Oracle of Omaha investor now owns over 5% of outstanding the Apple stock.

There is a set of consumers who always choose to buy Apple products irrespective of inflationary pressure. In 2017, Buffett indicated that the Apple stock is a buy candidate as consumers ‘want the product’ despite its prices.  

This gives Apple the leeway to pass on the rising costs to consumers (which won’t hurt sales) due to sheer brand name. And Apple is now paying off to Buffett. His Berkshire Hathaway clocked $9.8 billion in gains on Jan 28 as Apple jumped on a strong earnings report (read: Apple Posts All-Time Quarterly Revenues: ETFs to Buy).

Plus, Information Technology business normally does not require recurrent capital investments, which makes it an inflation-friendly investment. CNBC’s Jim Cramer said that big tech stocks are lucrative bets amid rising inflation and chances of higher interest rates.

Hence, one can bet on Apple ETFs like Technology Select Sector SPDR Fund (XLK - Free Report) , Fidelity MSCI Information Technology Index ETF (FTEC - Free Report) and Vanguard Information Technology ETF (VGT).

Bet on S&P 500

Buffett has long been a proponent of the index ETF investing as it offers a diversified approach. Buffett once suggested buying an S&P 500 low-cost index fund. “Keep buying it through thick and thin, and especially through thin,” he said.

A recent article published on MarketWatch pointed out that there is no five-year period in the history where the S&P 500 did not book a positive return. The S&P 500 is down 12.3% this year and was up a moderate 15.4% past year. But the index has gained 200% in the past five years.

If you are a long-term investor, you should know that for more than 100 years stocks have almost doubled every eight years irrespective of geopolitical crisis, bubbles, credit defaults, pandemics, currency devaluations and inflation.

Investors thus may track S&P 500 ETFs like Vanguard S&P 500 ETF (VOO - Free Report) , iShares Core S&P 500 ETF (IVV - Free Report) and SPDR S&P 500 ETF Trust (SPY).

Banks: Great Bets Amid Inflation

Bank of America is another key holding of Berkshire. Many of Berkshire's top investments are financial firms that kicked off the year in the green, including Bank of America (BAC), American Express (AXP) and US Bancorp (USB).

Rising inflation will likely lead the Fed to hike rates faster in 2022. In anticipation, rates have started to rise already. The biggest winner of the rising rate scenario is the banking sector. Decent valuation will add some more gains. As banks seek to borrow money at short-term rates and lend at long-term rates, a steepening yield curve earns more on lending and pay less on deposits, thereby leading to a wider spread. This expands net margins and increase banks’ profits.

Hence, ETFs like iShares U.S. Financial Services ETF (IYG - Free Report) , Invesco KBW Bank ETF (KBWB - Free Report) and Financial Select Sector SPDR Fund (XLF) are intriguing picks right now.

Payment Market is Likely to Fetch You Fat Returns Now

American Express is the third-largest holding at Berkshire Hathaway, only behind Apple and Bank of America, per a MoneyWise article, quoted on Yahoo. The article explained that American Express’ business model is inflation friendly. Merchants are charged a percentage of every Amex card transaction.

As the price of goods and services rises, bill amounts also go up and companies like AXP get a share of fatter bills. ETFMG Prime Mobile Payments ETF (IPAY - Free Report) should stand to gain on this trend as it has solid exposure to companies like AXP, Visa (V) and Mastercard (MA).

Liquid Gold Making Buffett Rich in 2022

WTI crude ETF United States Oil Fund, LP (USO - Free Report) is up 14% this year. Crude oil prices increased to a more than seven-year high and reported six straight weeks of gain as geopolitical turmoil between Russian and Ukraine aggravated concerns over energy supply crunch.

As a result, Buffett’s Berkshire's portfolio has got a lift from Chevron (CVX), which is Buffett's twelfth-largest holding. The oil giant's shares are up 10% this year, making it the top performer in the Dow. Chevron-heavy ETFs like Energy Select Sector SPDR Fund (XLE - Free Report) and Vanguard Energy ETF (VDE) could be bought as long the trend is your friend.

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