Given that the Berkshire Hathaway (NYSE: BRK-A) equity
portfolio is currently comprised of more than 40 securities, many
investors face a daunting task when it comes to playing copycat
on Warren Buffett's individual stock picks.
Since many folks do not have the capital to own 40-plus
positions for size,
previously been highlighted as an efficient
for investors to get wide-ranging exposure to the stocks
In fact, ETFs are a remarkably efficient way of playing
alongside Buffett. An ETF such as the SPDR Dow Jones Industrial
Average ETF (NYSE:
) along with consumer staples and financial services sector funds
will help retail investors gain exposure to the bulk of Berkshire
Hathaway's holdings. There is a rub when constructing a Berkshire
ETF portfolio and it is this: The ETF ideas most frequently
tossed as the best ways of mimicking Buffett lack
That is not say the ideas themselves are not accurate. Looking
equity holdings at the end of the fourth
, it is easy to see the Consumer Staples Select Sector SPDR
) and the iShares Dow Jones U.S. Financial Sector Index Fund
), among other ETFs, were fine ideas for getting exposure to
plenty of Berkshire holdings.
However, investors could have done better, at least in the
first quarter, by putting more emphasis on the sectors in which
Berkshire's holdings lie, rather than focusing on the ETFs that
allocate large portions of their weights to so-called Buffett
stocks. Here are some examples.
First Trust Consumer Staples AlphaDEX Fund (NYSE:
) XLP makes for a great, low-cost way of accessing plenty of
Berkshire's equity holdings. The largest consumer staples ETF is
the second-cheapest with an expense ratio of just 0.18 percent
per year and half of the ETF's top-10 holdings are also Berkshire
holdings. Those stocks are Procter & Gamble (NYSE:
), Coca-Cola (NYSE:
), Wal-Mart (NYSE:
), Kraft (NASDAQ:
) and Costco (NASDAQ:
staples have been a leadership group
for a significant part of this rally, so it is hard to quibble
with the 14.5 percent XLP returned in the first quarter. That is
until an investor hears about the First Trust Consumer Staples
AlphaDEX Fund (NYSE:
FXG is weighted based on growth and value metrics, not market
capitalization. In other words, FXG may be home to a few of
Berkshire's staples holdings, but they are not large parts of the
ETF. For example, Procter & Gamble
does not even account for 0.8 percent of FXG's
. The difference was clear in Q1 when FXG returned 21 percent
while only being slightly more volatile than XLP.
Vanguard Financials ETF (NYSE:
) Buffett's affinity for financial services stocks is well-known.
Berkshire's lineup included stakes in American Express (NYSE:
), Bank of New York Mellon (NYSE:
), MasterCard (NYSE:
), US Bancorp (NYSE:
) and Wells Fargo (NYSE:
), among others at the end of Q4. The company's first-quarter 13F
will show a stake in Goldman Sachs (NYSE:
) after Berkshire recently exchanged warrants for a smaller
equity stake in the venerable Wall Street bank.
Those holdings and others would make investors IYF or the the
Financial Select Sector SPDR (NYSE:
) would be the best ways of playing alongside Buffett in this
sector. In the first quarter, the best choice was actually the
Vanguard Financials ETF (NYSE:
). VFH is similar in terms of holdings to XLF, though the
Vanguard offering was the better Q1 performer while also being
Investors looking to go in a different direction can consider
the PowerShares KBW High Dividend Yield Financial Portfolio
). That ETF is home to mortgage REITs and business development
companies along with traditional banks and exchange operators.
There are no Berkshire holdings in KBWD, but that did not matter
in Q1 as the ETF returned 14.6 percent. KBWD was also less
volatile and pays a monthly dividend, something other financial
services ETFs cannot say.
PowerShares Dynamic Media Portfolio (NYSE:
) The caveat here is that the PowerShares Dynamic Media Portfolio
does not represent an alternative to another ETF that is a way of
accessing Buffett media stocks. Rather, the PowerShares Dynamic
Media Portfolio is THE way of gaining exposure to the legendary
investor's media stakes, which included Gannett (NYSE:
) and Starz (NASDAQ:
) at the end of the first quarter.
Those are the Berkshire holdings that are also found in PBS,
though Buffett's firm has stakes in several other media
companies. Of the ETFs highlighted in this piece, only FXG beat
the 17.5 percent returned by PBS in the first quarter. Investors
should note PBS does devote about 10 percent of its weight to
"un-Buffett" stocks Yahoo (NASDAQ:
) and Google (NASDAQ:
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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