Sunday
Dow Jones, StocksWarren Buffett Investment Index | Investing Like Warren Buffett
If one were to invest $1900 with Warren Buffett 44 years ago when one was 25 years of age, at age 69 that amount would now stand at $7,053,000 - compounding at an annual rate of 20.3%. Although most of this outstanding performance are outside of his investment in stocks (instead through the core business of Berkshire Hathaway insurance business), it would be safe to say that he applies the same standards on stock picking. Instead of putting money with anyone whose long term track record is unproven, why not follow the foot steps of our legendary investment Oracle.
After going through the 2008 Annual Report of Berkshire Hathaway, we have selected all the stocks in Warren Buffett’s portfolio which have fallen below Buffett’s purchase price(and excluded stocks trading above what Buffett paid for). We then replicated Buffett’s portfolio with our virtual $40,000 in The Inflationist Challenge, buying each stock in equal proportion to the total portfolio value. We call this the Warren Buffett Investment Index (WBI), designed to track the performance of Buffett’s picks and to leverage on his investment talent. We have no doubt this basket of stocks will outperform the index over time - and since we paid less than what Buffett did, we should outperform Buffett himself! (zero analysis time and effort on our part, but maximal upside)
Note that we have excluded Goldman Sachs and General Electric in our Warren Buffett Investment Index - this is intentional because he invested in GE and Goldman under special terms not available to ordinary shareholders - ie a dividend of 10% per annum for 5 years (effectively halving his purchase price). For new readers, check out our analysis of General Electric (which is a favourite of ours too).
Attached is a table showing our calculations. The first table (green) used the value at which Buffett paid for each stock (instead of current market value) to calculate the percentage each stock compared to the total portfolio value. Compared to the second table, we used the current (lower) value of the stocks - this lowers the % holding in ConocoPhilips which Buffett himself states was a mistake (in terms of timing of entry - we suspect it is still a great company at half price).
www.theinflationist.com
www.theinflationist.com
For your convenience, we have also included the “number of stocks to buy” in the Warren Buffett Investment Index (WBI) for a range of capital from $10,000-100,000. (ie if you had $10000 to invest, it shows you the number of stocks in each company that you should be buying to replicate Buffett’s portfolio).
www.theinflationist.com
To track the performance of WBI, simply check the “Top Investors” list - trading under the name of WBuffett.
Post Tags: Warren Buffett
Related Posts
Related Post
Popular
- The Inflationist Challenge 2009 (35)
- Stock Portfolio Management (15)
- Using Fibonacci Numbers in Trading to Predict the Market (12)
- Phosphate Rock, Phosphate Companies - Investing in Agriculture (9)
- Comparison of Bear Markets: 1929 vs 1937 vs 1976 vs 1987 vs 2000 vs Current Bear Market Charts (7)
May 16, 2009
Reply
44 years is a heck of a long time-im not even that old!
Buffett has compunded 1.6% over the last 10 years-prior to 1999 his results were great on big money but since 1999 not so good.
His investment stlye has encompassed ordinary and pref shares,Arbitrage,Work-outs,Fixed income trading,silver investing,treasuries,forex,purchasing of public and private businesses outright,insurance,derivatives,etc.
I think his investment style has been popularised more by the popular press then Buffett himself and the ordinary investor wouldnt have a chance of emulating the totality of his stlyle of investing/business
May 17, 2009
Reply
yes 44 years is a long time - but if one were 21 years old then and invested $2000 - and led an ordinary working life but spent every cent on holidays etc, the $2000 investment would now be worth in excess of $6 mil dollars. But you are right, his performance was better before - its harder to invest a larger amount of money and yet achieve the yield he did in the past.