ETFs to Mimic Warren Buffett’s Portfolio
April 2nd 2013 at 6:30am by Tom Lydon
Investment aficionado Warren Buffett is known for his ability to pick out individual stocks, but if he were to take on broad market strokes with exchange traded funds, then large blue-chips, consumer staples and financials would likely top the list.
Buffett has a penchant for steering toward simple businesses with proven business models and attractive valuations, writes Nicole Seghetti for the Motley Fool. But if one were to take a step back, investors will notice that he has focused on several key areas of the market.
For instance, Buffett’s Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) has significant exposure to five of the 30 blue-chips in the Dow Jones Industrial Average, including IBM (NYSE: IBM) and Procter & Gamble (NYSE: PG). ETF investors, though, can use the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) to gain exposure to the Dow. DIA has a 15% allocation to IBM and PG, a low 0.15% expense ratio and a 2.4% yield. [Over 80% of ETF Cash Heading Into Stocks as Dow Sets Record]
Buffett’s predilection for the simple things in life, such as hamburgers and soft drinks, also shows in his investment preferences, which include consumer staples giants Coca-Cola (NYSE: KO) and Wal-Mart (NYSE: WMT). The Consumer Staples Select Sector SPDR ETF (NYSEArca: XLP) provides exposure to large consumer brands. The fund has a 0.18% expense ratio and a 2.8% yield.
Since the financial crisis, Buffett has increased his exposure to financial services stocks. Berkshire Hathaway’s top holdings include American Express (NYSE: AXP), Wells Fargo (NYSE: WFC) and US Bancorp (NYSE: USB). The three stocks also make up 10% of the iShares Dow JOnes US Financial Sector ETF (NYSEArca: IYF). IYF has a 0.47% expense ratio and a 1.6% yield. [Financial ETF Ups Bet on Buffett’s Berkshire Hathaway]
For more information on ETF asset classes, visit our asset class ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.