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4 ETFs to Implement Buffett's Investing Philosophy
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Warren Buffett is a well-known figure in the global financial world, and it is worthwhile to track his investment portfolio. This is especially important given he exhibits strong conviction in his investment choices and doesn't frequently change them, making it an effective strategy for those aiming to walk his footsteps.
Buffett: Longstanding Fan of Value Investing
Warren Buffett, the renowned investor and CEO of Berkshire Hathaway, has long been known for his commitment to value investing. Value investing, a concept primarily developed by Benjamin Graham and David Dodd, professors at Columbia Business School in the 1920s, focuses on identifying undervalued stocks with strong fundamentals.
This strategy involves buying securities that appear underpriced by some form of fundamental analysis. Under Buffett's leadership, Berkshire Hathaway has become a winning example of value investing success.
Is Buffett’s Principle Changing?
In the third quarter of 2023, Buffett sold off about $7 billion worth of primarily value-oriented stocks and completely divesting from companies such as General Motors (GM), Johnson and Johnson (JNJ), United Parcel Service (UPS) and Proctor and Gamble (PG). The stock GM has the top-most Value Score of “A” and JNJ as well as UPS has an upbeat Value Score of “B”.
The move triggers a question in mind if Buffett – a proponent of value investing – is changing his investment philosophy. The answer is: Probably not.
Buffett's approach involves buying stocks in companies that are not just undervalued but also have strong potential for growth. He usually picks companies with durable competitive advantages, strong management teams, and stable earnings. His approach normally lies in the concept of "moat investing."
The term “economic moat” was popularized by Warren Buffett who said that he seeks "economic castles protected by unbreachable moats.”In simple words, a wide moat or high-quality company is probably Buffett’s choice, irrespective of its apparent value or growth status.
Buffett’s Top-Holding Apple: A Quality Stock
Notably, Apple (AAPL - Free Report) continues to hold the top position in Buffett’s portfolio with a solid 50% allocation. Buffett is renowned for favoring companies with substantial cash reserves, and despite Apple's slower growth, it still maintains a solid cash pile. Apple has considerable economic moat with features like brand recognition, ecosystem strength, continued innovations that set industry standard, solid cash reserves and customer loyalty.
Against this backdrop, below we highlight a few moat and quality ETFs that can be tapped now.
ETFs in Focus
VanEck Morningstar Wide Moat ETF (MOAT)
The underlying Morningstar Wide Moat Focus Index tracks the overall performance of the 20 most attractively priced companies with sustainable competitive advantages. No stock accounts for more than 2.94% of the 55-stock fund. Financials (19.81%) takes the largest weight in the fund, followed by Health care (19.66%), Information Technology (15.55%) and Industrials (15.16%). The fund charges 46 bps in fees. The fund is up 15.2% past year, in line with the S&P 500.
The underlying MSCI USA Sector Neutral Quality Index is based on a traditional market capitalization-weighted parent index, the MSCI USA Index which includes U.S. large and mid-capitalization stocks. No stock makes up more than about 6.23% of the 129-stock fund. IT (30.61%), healthcare (12.86%) and Financials (11.98%) are top three sectors of the fund. The fund (up 23.9%) topped the S&P 500 (up 19%) this year.
The underlying S&P 500 Quality Index tracks the performance of stocks in the S&P 500 Index that have the highest quality score, which is calculated based on three fundamental measures, return on equity, accruals ratio and financial leverage ratio.
No stock makes up more than about 6.23% of the 129-stock fund. IT (30.61%), healthcare (12.86%) and Financials (11.98%) are top three sectors of the fund. The fund (up 23.9%) topped the S&P 500 (up 19%) this year.
The underlying Northern Trust Quality Dividend Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is similar to that of the Northern Trust 1250 Index and the Index are selected based on expected dividend payment and fundamental factors.
No stock makes up more than about 9.45% of the 143-stock fund. IT (29.67%), Financials (15.16%) and Healthcare (11.29%) hold top three spots in the fund. The fund yields 2.21% annually. The fund QDF is up 12.2% this year versus a 19.1% uptick in the S&P 500.
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4 ETFs to Implement Buffett's Investing Philosophy
Warren Buffett is a well-known figure in the global financial world, and it is worthwhile to track his investment portfolio. This is especially important given he exhibits strong conviction in his investment choices and doesn't frequently change them, making it an effective strategy for those aiming to walk his footsteps.
Buffett: Longstanding Fan of Value Investing
Warren Buffett, the renowned investor and CEO of Berkshire Hathaway, has long been known for his commitment to value investing. Value investing, a concept primarily developed by Benjamin Graham and David Dodd, professors at Columbia Business School in the 1920s, focuses on identifying undervalued stocks with strong fundamentals.
This strategy involves buying securities that appear underpriced by some form of fundamental analysis. Under Buffett's leadership, Berkshire Hathaway has become a winning example of value investing success.
Is Buffett’s Principle Changing?
In the third quarter of 2023, Buffett sold off about $7 billion worth of primarily value-oriented stocks and completely divesting from companies such as General Motors (GM), Johnson and Johnson (JNJ), United Parcel Service (UPS) and Proctor and Gamble (PG). The stock GM has the top-most Value Score of “A” and JNJ as well as UPS has an upbeat Value Score of “B”.
The move triggers a question in mind if Buffett – a proponent of value investing – is changing his investment philosophy. The answer is: Probably not.
Buffett's approach involves buying stocks in companies that are not just undervalued but also have strong potential for growth. He usually picks companies with durable competitive advantages, strong management teams, and stable earnings. His approach normally lies in the concept of "moat investing."
The term “economic moat” was popularized by Warren Buffett who said that he seeks "economic castles protected by unbreachable moats.”In simple words, a wide moat or high-quality company is probably Buffett’s choice, irrespective of its apparent value or growth status.
Buffett’s Top-Holding Apple: A Quality Stock
Notably, Apple (AAPL - Free Report) continues to hold the top position in Buffett’s portfolio with a solid 50% allocation. Buffett is renowned for favoring companies with substantial cash reserves, and despite Apple's slower growth, it still maintains a solid cash pile. Apple has considerable economic moat with features like brand recognition, ecosystem strength, continued innovations that set industry standard, solid cash reserves and customer loyalty.
Against this backdrop, below we highlight a few moat and quality ETFs that can be tapped now.
ETFs in Focus
VanEck Morningstar Wide Moat ETF (MOAT)
The underlying Morningstar Wide Moat Focus Index tracks the overall performance of the 20 most attractively priced companies with sustainable competitive advantages. No stock accounts for more than 2.94% of the 55-stock fund. Financials (19.81%) takes the largest weight in the fund, followed by Health care (19.66%), Information Technology (15.55%) and Industrials (15.16%). The fund charges 46 bps in fees. The fund is up 15.2% past year, in line with the S&P 500.
iShares MSCI USA Quality Factor ETF (QUAL - Free Report)
The underlying MSCI USA Sector Neutral Quality Index is based on a traditional market capitalization-weighted parent index, the MSCI USA Index which includes U.S. large and mid-capitalization stocks. No stock makes up more than about 6.23% of the 129-stock fund. IT (30.61%), healthcare (12.86%) and Financials (11.98%) are top three sectors of the fund. The fund (up 23.9%) topped the S&P 500 (up 19%) this year.
Invesco S&P 500 Quality ETF (SPHQ - Free Report)
The underlying S&P 500 Quality Index tracks the performance of stocks in the S&P 500 Index that have the highest quality score, which is calculated based on three fundamental measures, return on equity, accruals ratio and financial leverage ratio.
No stock makes up more than about 6.23% of the 129-stock fund. IT (30.61%), healthcare (12.86%) and Financials (11.98%) are top three sectors of the fund. The fund (up 23.9%) topped the S&P 500 (up 19%) this year.
FlexShares Quality Dividend ETF (QDF - Free Report)
The underlying Northern Trust Quality Dividend Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is similar to that of the Northern Trust 1250 Index and the Index are selected based on expected dividend payment and fundamental factors.
No stock makes up more than about 9.45% of the 143-stock fund. IT (29.67%), Financials (15.16%) and Healthcare (11.29%) hold top three spots in the fund. The fund yields 2.21% annually. The fund QDF is up 12.2% this year versus a 19.1% uptick in the S&P 500.