Welcome!

Recurring Revenue Authors: Liz McMillan, Elizabeth White, Pat Romanski, Ed Featherston, Sujoy Sen

News Feed Item

Zacks Investment Ideas feature highlights: Berkshire Hathaway, Market Vectors Morningstar Wide Moat Research ETF, iShares Dow Jones Transportation Average ETF and SPDR S&P Insurance ETF

CHICAGO, Nov. 16, 2012 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Berkshire Hathaway (BRK.A), Market Vectors Morningstar Wide Moat Research ETF, (NYSE: MOAT), iShares Dow Jones Transportation Average ETF (NYSE: IYT) and SPDR S&P Insurance ETF (KIE)

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

INVESTMENT IDEAS

Invest Like Warren Buffett with These ETFs

Warren Buffett is widely regarded as one of the greatest investors of all-time, and for good reason. The 'Oracle of Omaha' has built up the one time struggling textile manufacturer of Berkshire Hathaway (BRK.A) into a global behemoth with investments in a variety of industries and sectors.

Buffett's incredible track record is best demonstrated by the rise of Berkshire Hathaway's stock price over the years; the security was trading around $340 in 1980 and is now well over $120,000/share today. Meanwhile, since mid-1990, an investment in BRK.A would have added about 1700% compared to an S&P 500 return of roughly 300% in the same time period (read Four ETFs up More Than 30% YTD).

Clearly, Warren Buffett has been able to perform quite well over a very long time period, further adding to his mystique and overall legend. This has led many investors to apply Buffett-like strategies to their own personal portfolios as well, hoping that the deep value strategies of Buffett would rub-off on their overall returns.

In order to tap into these techniques, investors can certainly buy up Berkshire Hathaway shares as a proxy for Buffett's methodology.  Yet one has to wonder if this is still the best strategy, given how large Berkshire has become. After all, it could be argued that Buffett, thanks to the size of his firm, can no longer apply his strategies as he once could when Berkshire was much more nimble.

Warren can now only make large bets in order to truly move the needle, a situation which has undoubtedly hurt the investor's impressive returns. In fact, a recent study suggested that in the 00's Buffett didn't add any alpha at all, a far cry from the nearly 19% alpha that he generated for Berkshire in 1956-1968 and the 'golden age' of Buffett's performance in the 1977-1981 period in which he added nearly 30% a year in excess gains (see Inside The Two ETFs Up More Than 140% YTD).

Given this trend, investors may be looking for another way to apply Buffett-like strategies to their portfolios without the clear issues that Berkshire is facing. Warren is no spring chicken at this point anyway, so why take on that added risk of his retirement (or worse) when it is very easy to apply his ideas to the broader stock market without Berkshire's help.

One easy way to do this could be by using a number of specialized ETFs in order to tap into the heart of Buffett's philosophy. These funds offer up Buffett-like exposure but at a fraction of the risk and overall cost as Berkshire, and furthermore, without the overhang of Warren's succession plans as well.

With this backdrop, any of the following three ETFs could make for excellent ways to invest like Buffett from a sector perspective. The Oracle has definitely developed a few favorite industries over the past few decades and we believe that the funds highlighted below offer excellent targeted exposure to some of Warren's favorite segments making them great ways for ETF investors to invest like Warren Buffett:

Wide Moat Investing

Arguably Buffett's most famous investing strategy is to go after so-called 'wide moat' businesses. This type of investing consists of targeting firms that have easily defendable positions thanks to their inherent businesses, strategies, or other market factors (see Time to Consider Wide Moat ETFs).

These companies generally have a huge advantage on one of the following five factors; intangible assets/brands, switching costs, network effects, cost advantages, or efficient scale. Any of these factors, or even a combination of them, generally can provide companies with a barrier against others, just like a moat.

Warren has definitely utilized this in his investing strategy over the years, targeting extremely wide moat companies for not only outright purchase, but investment as well.

In order to target a basket of wide moat firms, investors have a few choices at their disposal although the Market Vectors Morningstar Wide Moat Research ETF (MOAT) is arguably the best choice. 

This relatively new ETF tracks the Morningstar Wide Moat Focus Index which is a benchmark of 20 companies that have sustainable competitive advantages. Furthermore, the index only looks at the most attractively priced ones, ensuring a focus on deep value securities (read The Wide Moat ETF Explained).

Currently, the basket consists of a number of firms in the tech, materials, industrials, and financials sectors, with firms that have an advantage on the cost front comprising much of the portfolio. MOAT also zeroes in on large caps for the most part—suggesting a low level of volatility—although mid caps also make up roughly one-fourth of the assets as well.

Volume and AUM are still pretty light for this product, as it is still less than a year old. Still, the product charges a reasonable 49 basis points a year in fees and it has handily outperformed the S&P 500 since its inception, suggesting that there may be something to the strategy in ETF form.

Transportation Stocks

Another wide moat business is that of the transportation sector. Competition is oligopolistic as barriers to entry are extremely high, both in the general delivery business and especially in the railroad sector.

After all, the building, buying, and maintenance of a massive railroad empire isn't something that anyone can start in a short period of time. It is a very capital intensive endeavor, especially if one is looking to build one that can traverse across vast distances of the American landscape.

Probably due to this, the railroad industry has always intrigued Buffett as he was a major investor of Burlington Northern Santa Fe for quite some time, and he had a modest holding in Union Pacific as well. Then, Warren went 'all in on the American economy' buying up the rest of BNSF in a $44 billion dollar deal that cemented Buffett's love of the train industry.

While there isn't a pure railroad ETF at this point in time, investors still have a popular transport ETF in the form of the iShares Dow Jones Transportation Average ETF (IYT).

This ETF unsurprisingly tracks the Dow Jones Transportation Average, which is a broad benchmark of transport stocks based in the U.S. This includes all types of transportation stocks, including passenger, industrial, and general transportation service firms (see Is It Time to Buy the Transportation ETFs?).

Currently, the ETF consists of just 21 holdings overall with the biggest chunk going to railroads at roughly 31% of assets. Additionally it should be noted that railroads account for three of the top five holdings, including Buffett's own UNP at the top with 13% of assets.

The ETF isn't much of a yield destination, however, as it has a payout below 1.3%, although its beta is below one, suggesting that it is a lower volatility choice. Additionally, the product is reasonable from a fee perspective at 47 basis points a year; while volume and assets are relatively high, suggesting extremely tight bid ask spreads for this popular fund.

Insurance Industry

Another long-time favorite of the Oracle is the insurance industry, the segment that arguably gave Warren his real start in the investing world. That is because Warren is attracted to the 'float' that these companies have or the investable assets that firms have before they have to pay out claims on various insurance policies.

If these assets can be invested effectively, and if they can be easily paid out when claims eventually rise, they can be a huge asset for an insurance company that can greatly expand margins over the long term. Furthermore, Warren argues that these insurance premiums have a near-zero cost of capital that allows Warren to make acquisitions and various other investments, virtually interest-free (see Three Overlooked High Yield ETFs).

These companies currently form the backbone of Berkshire, providing the company with billions in float. Some of the more famous names in the Berkshire portfolio include GEICO and General RE, giving the firm exposure to both general insurance activities and reinsurance as well, both of which provide incredible amounts of cash premiums.

Obviously, this can be easily replicated by any other insurance company, suggesting that a broad look at the space, in order to diversify away risk if there is a catastrophe, could be the way to go. In order to do this, investors have a few insurance ETFs including the popular SPDR S&P Insurance ETF (KIE).

This ETF tracks the S&P Insurance Select Industry Index, which is a modified equal-weight benchmark. It includes companies in the American insurance industry including personal and commercial lines, property/casualty insurance, life insurance, reinsurance, insurance brokerage and financial guarantee.

With its equal weight methodology, the fund does a great job of spreading assets around its roughly 46 components, putting no more than 2.7% in any one security. Still, the product is somewhat concentrated in property and casualty insurance firms as these companies account for just under 40% of the fund (read Protect Your Portfolio with These Insurance ETFs).

The fund has a mediocre yield of just 1.7% though, but the P/E is under ten and the P/B is below 0.9. Investors should also note that the product charges a reasonable 35 basis points a year in fees, while its  AUM and volume—assets above $110 million—suggest a pretty low bid ask spread.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The company continually processes stock reports issued by analysts from numerous brokerage firms.  It monitors more than 200,000 earnings estimates, looking for changes. Then when changes are discovered, they're applied to help assign more than 4,400 stocks into five Zacks Rank categories:  #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock picking system; the Zacks Rank, continues to outperform the market by nearly a 3 to 1 margin.  The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros.  In short, it's your steady flow of profitable ideas GUARANTEED to be worth your time.  Register for your free subscription to Profit from the Pros.

Follow us on Twitter:  http://twitter.com/ZacksResearch

Join us on Facebook:  http://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

SOURCE Zacks Investment Research, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
The Internet of Things can drive efficiency for airlines and airports. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Sudip Majumder, senior director of development at Oracle, will discuss the technical details of the connected airline baggage and related social media solutions. These IoT applications will enhance travelers' journey experience and drive efficiency for the airlines and the airports. The session will include a working demo and a technical d...
What happens when the different parts of a vehicle become smarter than the vehicle itself? As we move toward the era of smart everything, hundreds of entities in a vehicle that communicate with each other, the vehicle and external systems create a need for identity orchestration so that all entities work as a conglomerate. Much like an orchestra without a conductor, without the ability to secure, control, and connect the link between a vehicle’s head unit, devices, and systems and to manage the ...
Businesses are struggling to manage the information flow and interactions between all of these new devices and things jumping on their network, and the apps and IT systems they control. The data businesses gather is only helpful if they can do something with it. In his session at @ThingsExpo, Chris Witeck, Principal Technology Strategist at Citrix, will discuss how different the impact of IoT will be for large businesses, expanding how IoT will allow large organizations to make their legacy ap...
The many IoT deployments around the world are busy integrating smart devices and sensors into their enterprise IT infrastructures. Yet all of this technology – and there are an amazing number of choices – is of no use without the software to gather, communicate, and analyze the new data flows. Without software, there is no IT. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists will look at the protocols that communicate data and the emerging data analy...
As ridesharing competitors and enhanced services increase, notable changes are occurring in the transportation model. Despite the cost-effective means and flexibility of ridesharing, both drivers and users will need to be aware of the connected environment and how it will impact the ridesharing experience. In his session at @ThingsExpo, Timothy Evavold, Executive Director Automotive at Covisint, will discuss key challenges and solutions to powering a ride sharing and/or multimodal model in the a...
SYS-CON Events announced today that Commvault, a global leader in enterprise data protection and information management, has been named “Bronze Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Commvault is a leading provider of data protection and information management solutions, helping companies worldwide activate their data to drive more value and business insight and to transform moder...
Cloud computing is being adopted in one form or another by 94% of enterprises today. Tens of billions of new devices are being connected to The Internet of Things. And Big Data is driving this bus. An exponential increase is expected in the amount of information being processed, managed, analyzed, and acted upon by enterprise IT. This amazing is not part of some distant future - it is happening today. One report shows a 650% increase in enterprise data by 2020. Other estimates are even higher....
What are the new priorities for the connected business? First: businesses need to think differently about the types of connections they will need to make – these span well beyond the traditional app to app into more modern forms of integration including SaaS integrations, mobile integrations, APIs, device integration and Big Data integration. It’s important these are unified together vs. doing them all piecemeal. Second, these types of connections need to be simple to design, adapt and configure...
Digital innovation is the next big wave of business transformation based on digital technologies of which IoT and Big Data are key components, For example: Business boundary innovation is a challenge to excavate third-party business value using IoT and BigData, like Nest Business structure innovation may propose re-building business structure from scratch, as Uber does in the taxicab industry The social model innovation is also a big challenge to the new social architecture with the design fr...
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, wh...
Data is an unusual currency; it is not restricted by the same transactional limitations as money or people. In fact, the more that you leverage your data across multiple business use cases, the more valuable it becomes to the organization. And the same can be said about the organization’s analytics. In his session at 19th Cloud Expo, Bill Schmarzo, CTO for the Big Data Practice at EMC, will introduce a methodology for capturing, enriching and sharing data (and analytics) across the organizati...
SYS-CON Events announced today that Bsquare has been named “Silver Sponsor” of SYS-CON's @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. For more than two decades, Bsquare has helped its customers extract business value from a broad array of physical assets by making them intelligent, connecting them, and using the data they generate to optimize business processes.
SYS-CON Events has announced today that Roger Strukhoff has been named conference chair of Cloud Expo and @ThingsExpo 2016 Silicon Valley. The 19th Cloud Expo and 6th @ThingsExpo will take place on November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. "The Internet of Things brings trillions of dollars of opportunity to developers and enterprise IT, no matter how you measure it," stated Roger Strukhoff. "More importantly, it leverages the power of devices and the Interne...
19th Cloud Expo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Meanwhile, 94% of enterpri...
In this strange new world where more and more power is drawn from business technology, companies are effectively straddling two paths on the road to innovation and transformation into digital enterprises. The first path is the heritage trail – with “legacy” technology forming the background. Here, extant technologies are transformed by core IT teams to provide more API-driven approaches. Legacy systems can restrict companies that are transitioning into digital enterprises. To truly become a lea...
According to Forrester Research, every business will become either a digital predator or digital prey by 2020. To avoid demise, organizations must rapidly create new sources of value in their end-to-end customer experiences. True digital predators also must break down information and process silos and extend digital transformation initiatives to empower employees with the digital resources needed to win, serve, and retain customers.
Video experiences should be unique and exciting! But that doesn’t mean you need to patch all the pieces yourself. Users demand rich and engaging experiences and new ways to connect with you. But creating robust video applications at scale can be complicated, time-consuming and expensive. In his session at @ThingsExpo, Zohar Babin, Vice President of Platform, Ecosystem and Community at Kaltura, will discuss how VPaaS enables you to move fast, creating scalable video experiences that reach your...
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life sett...
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices - comp...