Image: BigstockWarren Buffett is a well-known figure in the global financial world, and it may be worthwhile to track his investment portfolio. This is especially significant given that he exhibits strong conviction in his investment choices and doesn’t frequently change them, making it an effective strategy for those aiming to follow 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 Columbia Business School professors Benjamin Graham and David Dodd, 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, completely divesting from companies such as General Motors (GM), Johnson and Johnson (JNJ), United Parcel Service (UPS), and Proctor and Gamble (PG). General Motors’ stock has the top-most Value Score of “A,” while Johnson and Johnson and United Parcel Service both boast an upbeat Value Score of “B.”The move brings to mind the question of if Buffett – a proponent of value investing – is changing his investment philosophy. The answer is: Probably not.Buffett’s approach often 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 a high-quality company would likely be 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 a 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, here we will highlight a few moat and quality ETFs that can be tapped into now.
ETFs in Focus – VanEck Morningstar Wide Moat ETF (MOAT)
This 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 Healthcare (19.66%), Information Technology (15.55%), and Industrials (15.16%). The fund charges 46 bps in fees. The fund is up 15.2% over the past year, roughly in line with the S&P 500.
iShares MSCI USA Quality Factor ETF (QUAL – Free Report)
This 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 the top three sectors of the fund. The fund is up 23.9% this year, topping the performance of the S&P 500.
Invesco S&P 500 Quality ETF (SPHQ – Free Report)
This 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 the top three sectors of the fund. The fund’s performance has also outperformed that of the S&P 500 this year.
FlexShares Quality Dividend ETF (QDF – Free Report)
This 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. Inclusions to its portfolio 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 the top three spots in the fund. The fund yields 2.21% annually. The fund is up 12.2% this year versus the 19% rise seen in the S&P 500.More By This Author:IBM Up 7.9% Since Last Earnings Report: Can It Continue?Alcoa Stock Declines While Market Improves: Some Information for Investors3 Dividend-Paying P&C Insurers That Promise Steady Returns
