To participate in Warren Buffett’s style of investing, you have more options today than at any time I can remember. You could pick stocks yourself by following Buffett’s portfolio and his principles. If you do not want to do that, you could buy Berkshire Hathaway shares directly. Two other avenues would be to invest in a mutual fund that owns lots of Berkshire and Berkshire-type stocks. Or, you could buy shares in mutual funds that seek to emulate Buffett’s style of investing. So, there are plenty of ways to go.
In terms of mutual funds, Sequoia Fund (SEQUX) certainly has been investing in Berkshire Hathaway longer than any other fund of which I know. If you are not familiar with the fund, it follows Warren Buffett's investment style and strategies as closely as any mutual fund does. For more on the fund's history and investment strategy, you can go here to its web site. Unlike most mutual fund web sites, it is not very marketing-oriented.
In addition to Sequoia, there are several good mutual funds that seek to emulate Buffett’s approach to investing, although even in that regard, there are differences as to which type of Buffett-style investing they follow — the early Buffett or the later Buffett. Morningstar has a nice piece that covers mutual funds following Buffett’s approach to investing [emphasis added].
These Buffett-Inspired Funds Have Learned Their Lessons Well (Morningstar, Apr. 30, 2010, Michael Breen)
…How’d they do? In a word: Good. All the funds have cranked out solid returns during the past year (see table 1) but Bruce Berkowitz’s Fairholme fund stands alone. It not only posted the best return the past year, but tops the heap in every other trailing period. Berkowitz will eventually stub his toe, but for the past decade he’s been nearly perfect.
Source: Morningstar
As Morningstar’s Michael Breen pointed out Fairholme Fund (FAIRX) has been on a roll for a number of years, but Ariel Focus (ARFFX), FAM Value (FAMVX), LKCM Equity (LKEQX), Oak Value (OAKVX), Sequoia (SEQUX) and Weitz Partners Value (WPVIX) have done well too. The interesting part to me is how much they have deviated from the results of Berkshire itself recently. And, I have previously posted on how much Berkshire’s results have diverged from the S&P 500 too.
This year, Berkshire is nicely outperforming, but there have been other years in which it lagged the index considerably. For example, in 2009, Berkshire lagged the index by nearly 21%. That was not the worst year though. That distinction belongs to 1999, a year in which Berkshire plummeted by almost 20% in a year in which the index was up by about 20%. Yikes.
I did not own Berkshire in 1999 so I cannot say what I would have done, but it would have been rough. I did own Berkshire last year and I hung in there so I am enjoying this year’s returns.
Hat tip: Abnormal Returns
Kurt Brouwer owns shares in Berkshire Hathaway (BRKB)
Error message
Kurt Brouwer is a fee-only financial advisor with three decades of experience. He is the chairman and co-founder of Brouwer & Janachowski, LLC. Kurt has written books, articles and hundreds of blog posts on mutual funds, ETFs and other investment topics. E-mail: kurt.brouwer *at* gmail.com.
Copyright © 2009 MarketWatch, Inc. All rights reserved. By using this site, you agree to the Terms of Service and Privacy Policy.
Intraday data provided by Interactive Data Real Time Services, a division of Interactive Data Corp. and subject to terms of use. Historical and current end-of-day data provided by Interactive Data Pricing and Reference Data. More information on NASDAQ traded symbols and their current financial status. Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. Dow Jones Indexes(SM) from Dow Jones & Company, Inc. SEHK intraday data is provided by Comstock and is at least 60-minutes delayed. All quotes are in local exchange time. Real-time last sale data provided by NASDAQ.
Read Full Article »