|By PR Newswire||
|November 16, 2012 09:00 AM EST||
CHICAGO, Nov. 16, 2012 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Berkshire Hathaway (BRK.A), Market Vectors Morningstar Wide Moat Research ETF, (NYSE: MOAT), iShares Dow Jones Transportation Average ETF (NYSE: IYT) and SPDR S&P Insurance ETF (KIE)
Invest Like Warren Buffett with These ETFs
Warren Buffett is widely regarded as one of the greatest investors of all-time, and for good reason. The 'Oracle of Omaha' has built up the one time struggling textile manufacturer of Berkshire Hathaway (BRK.A) into a global behemoth with investments in a variety of industries and sectors.
Buffett's incredible track record is best demonstrated by the rise of Berkshire Hathaway's stock price over the years; the security was trading around $340 in 1980 and is now well over $120,000/share today. Meanwhile, since mid-1990, an investment in BRK.A would have added about 1700% compared to an S&P 500 return of roughly 300% in the same time period (read Four ETFs up More Than 30% YTD).
Clearly, Warren Buffett has been able to perform quite well over a very long time period, further adding to his mystique and overall legend. This has led many investors to apply Buffett-like strategies to their own personal portfolios as well, hoping that the deep value strategies of Buffett would rub-off on their overall returns.
In order to tap into these techniques, investors can certainly buy up Berkshire Hathaway shares as a proxy for Buffett's methodology. Yet one has to wonder if this is still the best strategy, given how large Berkshire has become. After all, it could be argued that Buffett, thanks to the size of his firm, can no longer apply his strategies as he once could when Berkshire was much more nimble.
Warren can now only make large bets in order to truly move the needle, a situation which has undoubtedly hurt the investor's impressive returns. In fact, a recent study suggested that in the 00's Buffett didn't add any alpha at all, a far cry from the nearly 19% alpha that he generated for Berkshire in 1956-1968 and the 'golden age' of Buffett's performance in the 1977-1981 period in which he added nearly 30% a year in excess gains (see Inside The Two ETFs Up More Than 140% YTD).
Given this trend, investors may be looking for another way to apply Buffett-like strategies to their portfolios without the clear issues that Berkshire is facing. Warren is no spring chicken at this point anyway, so why take on that added risk of his retirement (or worse) when it is very easy to apply his ideas to the broader stock market without Berkshire's help.
One easy way to do this could be by using a number of specialized ETFs in order to tap into the heart of Buffett's philosophy. These funds offer up Buffett-like exposure but at a fraction of the risk and overall cost as Berkshire, and furthermore, without the overhang of Warren's succession plans as well.
With this backdrop, any of the following three ETFs could make for excellent ways to invest like Buffett from a sector perspective. The Oracle has definitely developed a few favorite industries over the past few decades and we believe that the funds highlighted below offer excellent targeted exposure to some of Warren's favorite segments making them great ways for ETF investors to invest like Warren Buffett:
Wide Moat Investing
Arguably Buffett's most famous investing strategy is to go after so-called 'wide moat' businesses. This type of investing consists of targeting firms that have easily defendable positions thanks to their inherent businesses, strategies, or other market factors (see Time to Consider Wide Moat ETFs).
These companies generally have a huge advantage on one of the following five factors; intangible assets/brands, switching costs, network effects, cost advantages, or efficient scale. Any of these factors, or even a combination of them, generally can provide companies with a barrier against others, just like a moat.
Warren has definitely utilized this in his investing strategy over the years, targeting extremely wide moat companies for not only outright purchase, but investment as well.
In order to target a basket of wide moat firms, investors have a few choices at their disposal although the Market Vectors Morningstar Wide Moat Research ETF (MOAT) is arguably the best choice.
This relatively new ETF tracks the Morningstar Wide Moat Focus Index which is a benchmark of 20 companies that have sustainable competitive advantages. Furthermore, the index only looks at the most attractively priced ones, ensuring a focus on deep value securities (read The Wide Moat ETF Explained).
Currently, the basket consists of a number of firms in the tech, materials, industrials, and financials sectors, with firms that have an advantage on the cost front comprising much of the portfolio. MOAT also zeroes in on large caps for the most part—suggesting a low level of volatility—although mid caps also make up roughly one-fourth of the assets as well.
Volume and AUM are still pretty light for this product, as it is still less than a year old. Still, the product charges a reasonable 49 basis points a year in fees and it has handily outperformed the S&P 500 since its inception, suggesting that there may be something to the strategy in ETF form.
Another wide moat business is that of the transportation sector. Competition is oligopolistic as barriers to entry are extremely high, both in the general delivery business and especially in the railroad sector.
After all, the building, buying, and maintenance of a massive railroad empire isn't something that anyone can start in a short period of time. It is a very capital intensive endeavor, especially if one is looking to build one that can traverse across vast distances of the American landscape.
Probably due to this, the railroad industry has always intrigued Buffett as he was a major investor of Burlington Northern Santa Fe for quite some time, and he had a modest holding in Union Pacific as well. Then, Warren went 'all in on the American economy' buying up the rest of BNSF in a $44 billion dollar deal that cemented Buffett's love of the train industry.
While there isn't a pure railroad ETF at this point in time, investors still have a popular transport ETF in the form of the iShares Dow Jones Transportation Average ETF (IYT).
This ETF unsurprisingly tracks the Dow Jones Transportation Average, which is a broad benchmark of transport stocks based in the U.S. This includes all types of transportation stocks, including passenger, industrial, and general transportation service firms (see Is It Time to Buy the Transportation ETFs?).
Currently, the ETF consists of just 21 holdings overall with the biggest chunk going to railroads at roughly 31% of assets. Additionally it should be noted that railroads account for three of the top five holdings, including Buffett's own UNP at the top with 13% of assets.
The ETF isn't much of a yield destination, however, as it has a payout below 1.3%, although its beta is below one, suggesting that it is a lower volatility choice. Additionally, the product is reasonable from a fee perspective at 47 basis points a year; while volume and assets are relatively high, suggesting extremely tight bid ask spreads for this popular fund.
Another long-time favorite of the Oracle is the insurance industry, the segment that arguably gave Warren his real start in the investing world. That is because Warren is attracted to the 'float' that these companies have or the investable assets that firms have before they have to pay out claims on various insurance policies.
If these assets can be invested effectively, and if they can be easily paid out when claims eventually rise, they can be a huge asset for an insurance company that can greatly expand margins over the long term. Furthermore, Warren argues that these insurance premiums have a near-zero cost of capital that allows Warren to make acquisitions and various other investments, virtually interest-free (see Three Overlooked High Yield ETFs).
These companies currently form the backbone of Berkshire, providing the company with billions in float. Some of the more famous names in the Berkshire portfolio include GEICO and General RE, giving the firm exposure to both general insurance activities and reinsurance as well, both of which provide incredible amounts of cash premiums.
Obviously, this can be easily replicated by any other insurance company, suggesting that a broad look at the space, in order to diversify away risk if there is a catastrophe, could be the way to go. In order to do this, investors have a few insurance ETFs including the popular SPDR S&P Insurance ETF (KIE).
This ETF tracks the S&P Insurance Select Industry Index, which is a modified equal-weight benchmark. It includes companies in the American insurance industry including personal and commercial lines, property/casualty insurance, life insurance, reinsurance, insurance brokerage and financial guarantee.
With its equal weight methodology, the fund does a great job of spreading assets around its roughly 46 components, putting no more than 2.7% in any one security. Still, the product is somewhat concentrated in property and casualty insurance firms as these companies account for just under 40% of the fund (read Protect Your Portfolio with These Insurance ETFs).
The fund has a mediocre yield of just 1.7% though, but the P/E is under ten and the P/B is below 0.9. Investors should also note that the product charges a reasonable 35 basis points a year in fees, while its AUM and volume—assets above $110 million—suggest a pretty low bid ask spread.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The company continually processes stock reports issued by analysts from numerous brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes. Then when changes are discovered, they're applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock picking system; the Zacks Rank, continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros. In short, it's your steady flow of profitable ideas GUARANTEED to be worth your time. Register for your free subscription to Profit from the Pros.
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
SOURCE Zacks Investment Research, Inc.
The recent trends like cloud computing, social, mobile and Internet of Things are forcing enterprises to modernize in order to compete in the competitive globalized markets. However, enterprises are approaching newer technologies with a more silo-ed way, gaining only sub optimal benefits. The Modern Enterprise model is presented as a newer way to think of enterprise IT, which takes a more holistic approach to embracing modern technologies.
May. 25, 2015 11:00 PM EDT Reads: 5,926
The true value of the Internet of Things (IoT) lies not just in the data, but through the services that protect the data, perform the analysis and present findings in a usable way. With many IoT elements rooted in traditional IT components, Big Data and IoT isn’t just a play for enterprise. In fact, the IoT presents SMBs with the prospect of launching entirely new activities and exploring innovative areas. CompTIA research identifies several areas where IoT is expected to have the greatest impact.
May. 25, 2015 09:00 PM EDT Reads: 4,757
Every day we read jaw-dropping stats on the explosion of data. We allocate significant resources to harness and better understand it. We build businesses around it. But we’ve only just begun. For big payoffs in Big Data, CIOs are turning to cognitive computing. Cognitive computing’s ability to securely extract insights, understand natural language, and get smarter each time it’s used is the next, logical step for Big Data.
May. 25, 2015 08:00 PM EDT Reads: 1,873
The 4th International Internet of @ThingsExpo, co-located with the 17th International Cloud Expo - to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA - announces that its Call for Papers is open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
May. 25, 2015 07:00 PM EDT Reads: 1,524
There's no doubt that the Internet of Things is driving the next wave of innovation. Google has spent billions over the past few months vacuuming up companies that specialize in smart appliances and machine learning. Already, Philips light bulbs, Audi automobiles, and Samsung washers and dryers can communicate with and be controlled from mobile devices. To take advantage of the opportunities the Internet of Things brings to your business, you'll want to start preparing now.
May. 25, 2015 07:00 PM EDT Reads: 5,718
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo in Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal an...
May. 25, 2015 04:00 PM EDT Reads: 2,438
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at @ThingsExpo, Robin Raymond, Chief Architect at Hookflash, will walk through the shifting landscape of traditional telephone and voice services ...
May. 25, 2015 03:00 PM EDT Reads: 4,213
The 17th International Cloud Expo has announced that its Call for Papers is open. 17th International Cloud Expo, to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, APM, APIs, Microservices, Security, Big Data, Internet of Things, DevOps and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal today!
May. 25, 2015 02:00 PM EDT Reads: 4,144
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at Internet of @ThingsExpo, James Kirkland, Chief Architect for the Internet of Things and Intelligent Systems at Red Hat, described how to revolutioniz...
May. 25, 2015 02:00 PM EDT Reads: 4,749
All major researchers estimate there will be tens of billions devices - computers, smartphones, tablets, and sensors - connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades. With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo, June 9-11, 2015, at the Javits Center in New York City. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be
May. 25, 2015 01:15 PM EDT Reads: 1,824
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, and physical persons. In the IoT vision, every new "thing" - sensor, actuator, data source, data con...
May. 25, 2015 01:00 PM EDT Reads: 6,158
Container frameworks, such as Docker, provide a variety of benefits, including density of deployment across infrastructure, convenience for application developers to push updates with low operational hand-holding, and a fairly well-defined deployment workflow that can be orchestrated. Container frameworks also enable a DevOps approach to application development by cleanly separating concerns between operations and development teams. But running multi-container, multi-server apps with containers is very hard. You have to learn five new and different technologies and best practices (libswarm, sy...
May. 25, 2015 12:00 PM EDT Reads: 1,804
SYS-CON Events announced today that DragonGlass, an enterprise search platform, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. After eleven years of designing and building custom applications, OpenCrowd has launched DragonGlass, a cloud-based platform that enables the development of search-based applications. These are a new breed of applications that utilize a search index as their backbone for data retrieval. They can easily adapt to new data sets and provide access to both structured and unstruc...
May. 25, 2015 12:00 PM EDT Reads: 1,751
There's Big Data, then there's really Big Data from the Internet of Things. IoT is evolving to include many data possibilities like new types of event, log and network data. The volumes are enormous, generating tens of billions of logs per day, which raise data challenges. Early IoT deployments are relying heavily on both the cloud and managed service providers to navigate these challenges. In her session at Big Data Expo®, Hannah Smalltree, Director at Treasure Data, discussed how IoT, Big Data and deployments are processing massive data volumes from wearables, utilities and other machines...
May. 25, 2015 10:00 AM EDT Reads: 4,056
Buzzword alert: Microservices and IoT at a DevOps conference? What could possibly go wrong? In this Power Panel at DevOps Summit, moderated by Jason Bloomberg, the leading expert on architecting agility for the enterprise and president of Intellyx, panelists will peel away the buzz and discuss the important architectural principles behind implementing IoT solutions for the enterprise. As remote IoT devices and sensors become increasingly intelligent, they become part of our distributed cloud environment, and we must architect and code accordingly. At the very least, you'll have no problem fil...
May. 25, 2015 10:00 AM EDT Reads: 1,737
SYS-CON Events announced today that MetraTech, now part of Ericsson, has been named “Silver Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the Javits Center in New York, NY. Ericsson is the driving force behind the Networked Society- a world leader in communications infrastructure, software and services. Some 40% of the world’s mobile traffic runs through networks Ericsson has supplied, serving more than 2.5 billion subscribers.
May. 25, 2015 09:45 AM EDT Reads: 1,088
The worldwide cellular network will be the backbone of the future IoT, and the telecom industry is clamoring to get on board as more than just a data pipe. In his session at @ThingsExpo, Evan McGee, CTO of Ring Plus, Inc., discussed what service operators can offer that would benefit IoT entrepreneurs, inventors, and consumers. Evan McGee is the CTO of RingPlus, a leading innovative U.S. MVNO and wireless enabler. His focus is on combining web technologies with traditional telecom to create a new breed of unified communication that is easily accessible to the general consumer. With over a de...
May. 25, 2015 06:00 AM EDT Reads: 4,658
Disruptive macro trends in technology are impacting and dramatically changing the "art of the possible" relative to supply chain management practices through the innovative use of IoT, cloud, machine learning and Big Data to enable connected ecosystems of engagement. Enterprise informatics can now move beyond point solutions that merely monitor the past and implement integrated enterprise fabrics that enable end-to-end supply chain visibility to improve customer service delivery and optimize supplier management. Learn about enterprise architecture strategies for designing connected systems tha...
May. 25, 2015 05:00 AM EDT Reads: 5,834
Cloud is not a commodity. And no matter what you call it, computing doesn’t come out of the sky. It comes from physical hardware inside brick and mortar facilities connected by hundreds of miles of networking cable. And no two clouds are built the same way. SoftLayer gives you the highest performing cloud infrastructure available. One platform that takes data centers around the world that are full of the widest range of cloud computing options, and then integrates and automates everything. Join SoftLayer on June 9 at 16th Cloud Expo to learn about IBM Cloud's SoftLayer platform, explore se...
May. 25, 2015 04:45 AM EDT Reads: 3,060
SYS-CON Media announced today that 9 out of 10 " most read" DevOps articles are published by @DevOpsSummit Blog. Launched in October 2014, @DevOpsSummit Blog offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long development cycles that produce softw...
May. 25, 2015 04:15 AM EDT Reads: 4,036