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Capture the modern day Superinvestors' best ideas with 2 ETFs

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August 19, 2014 – Comments (1) | RELATED TICKERS: VGT , XLF

A website I tend to visit frequently is dataroma.com, where a select group of superinvestors' portfolios are tracked.  From their website: "Many of the money managers we track are legendary value investors such as Warren Buffett, Seth Klarman, Bill Nygren, Wallace Weitz, Bruce Berkowitz, and the Tweedy Browne team."

One of the high points of the site is that they compile all of the holdings of each of the investors, generating a "Grand Portfolio."  While this inevitably leads to a lot of mega-cap stocks, I think it still provides a wonderful starting list for people that are trying to "clone" the big guys.

The current top stocks begin with WFC at #1.  2.6% of the Grand Portfolio is comprised of WFC (largely thanks to Buffett), and 16 of the superinvestors hold a position in the stock.  After WFC, the following top stocks, in order of portfolio weight, are:

BRK.B, AIG, BAC, MSFT, HRG, VRX, C, ORCL, SHLD, BRK.A, RFP, KO, MU, WU, AAPL, GOOGL, MA, AGN, BBRY, CSCO, AXP, INTC, AN, ZINC, JNJ, BK, CNQ, ESRX, IBM, APD, and JPM.

One thing that jumps out at me in this list is the number of mega/large cap financials (WFC, BRK.A, BRK.B, AIG, BAC, C, BK, JPM, AXP) and mega/large cap tech stocks (MSFT, ORCL, AAPL, GOOGL, MA, CSCO, INTC, IBM).  Over 50% of the top 32 stocks fall in these 2 categories.

It makes sense to me why these 2 sectors are being targeted - the mega cap financials are still trading at historically low P/B ratios, while the mega cap tech stocks are trading at low EV/FCF ratios. 

Now, if you're like me, you're not dying to go out and pick up 15-20 new stocks.  But an easy way to get concentrated exposure to these 2 sectors is through a couple of low-cost ETFs: the VGT and the XLF.  The VGT has been my largest RL holding for over a year now, and I recently added to my XLF position, making it my second largest RL holding.  I fully expect to be able to sit on these 2 ETFs for the next 5-10 years (or longer) without blinking an eye.  I might be sacrificing some performance by not specifically targeting a few stocks rather than taking a whole basket, but if the superinvestors, collectively, can't choose among these stocks, why should I try?  Now, I do own a few of these names, individually (BRK.B and IBM), but rather than racking my brain over CSCO/INTC/ORCL or JPM/BAC/C, why not just take the lot?  A boatload of the superinvestors like all of these names, so I guess I might as well, too.

1 Comments – Post Your Own

#1) On August 19, 2014 at 3:00 PM, ElCid16 (96.86) wrote:

After JPM, the next 5 holdings include GS, USB, and BEN - also top holdings of the XLF.

The XLF, by itself, probably captures 30-40% of the Superinvestors' top ideas. 

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