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Want To Invest Like Warren Buffett? Consider This ETF

Published 2022/03/11, 11:14
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Warren Buffett, one of the most successful investors on Wall Street, has recently issued his annual letter for investors in Berkshire Hathaway (NYSE:BRKa) (NYSE:BRKb) stock. Many in the investing world regard these letters as a must-read.

They provide clear insight into how Buffet, Charlie Munger, his long-time business partner, and their investment team see the state of the economy and how they devise their investment strategy.

When numerous uncertainties, such as the war in Ukraine, red-hot inflation levels, and questions marks over the next move by the Federal Reserve, fray retail investors’ nerves, the street pays even closer attention to what Buffett says and buys.

In fact, amid the current broad market selloff, Berkshire Hathaway has managed to post a solid 8.8% gain, making the 91-year old investor one of the world’s five wealthiest people again. The stock closed at $325.30 on Thursday.

BRKb Weekly Chart

Of the publicly-traded companies owned by Berkshire Hathaway, Apple (NASDAQ:AAPL) has the top spot in the portfolio. Buffett’s team has a 5.6% stake in the consumer technology giant.

Other notable companies include American Express (NYSE:AXP), Bank of America (NYSE:BAC), Bank of New York Mellon (NYSE:BK), Chevron (NYSE:CVX), Coca-Cola (NYSE:KO), General Motors (NYSE:GM), Moody's (NYSE:MCO), Verizon Communications (NYSE:VZ), and others.

We should note that the InvestingPro website regularly updates Berkshire Hathaway’s portfolio holdings. Also, the group’s 13F filings with the US Securities and Exchange Commission (SEC) list stocks held by Buffett’s team.

Market participants who wish to benefit from Warren Buffett’s wisdom could obviously buy shares in Berkshire Hathaway stock. In addition, exchange-traded funds (ETFs) that hold Berkshire Hathaway stock could appeal to some investors. Examples include:

  • Financial Select Sector SPDR® Fund (NYSE:XLF)—down 6.1% YTD;
  • Davis Select US Equity (NYSE:DUSA)—down 8.5% YTD;
  • Absolute Core Strategy ETF (NYSEARCA:ABEQ)—up 1.4% YTD;

  • Xtrackers Russell 1000 US QARP ETF (NYSEARCA:QARP)—down 8.9% YTD;
  • SPDR® S&P 500 (NYSE:SPY)—down 10.4% YTD.

Today’s article introduces another fund for readers who would like to have access to Buffett’s portfolio and his investment style.

VanEck Morningstar Wide Moat ETF

  • Current Price: $71.06
  • 52-week range: $64.58 - $78.43
  • Dividend yield: 1.13%
  • Expense ratio: 0.46% per year

According to Buffett, companies with ‘wide moats,’ or those with sustainable competitive advantages, deserve a place in long-term retail portfolios. He highlights that such a moat:

“Protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business “castle” that is earning high returns.”

Our fund, the VanEck Morningstar Wide Moat ETF (NYSE:MOAT), tracks the returns of the Morningstar® Wide Moat Focus Index, giving access to 47 companies with competitive advantages that rival businesses cannot easily overtake. These firms are selected based on criteria identified by Morningstar. In addition to sector caps, there are numerous buffer rules.

MOAT Weekly Chart

MOAT was first listed in April 2012. Its top 10 stocks account for close to 28% of $7 billion net assets. With regards to sub-sectors, we see information technology (24.0%), health care (16.7%), industrials (15.1%), and consumer staples (14.7%), among others.

Leading holdings in the portfolio include the liquefied natural gas heavyweight Cheniere Energy (NYSE:LNG), agriscience group Corteva (NYSE:CTVA), defense contractor Lockheed Martin (NYSE:LMT), Wells Fargo (NYSE:WFC), Berkshire Hathaway, and pharma giant Merck & Company (NYSE:MRK).

MOAT has lost 6.6% of its value since the start of 2022 but is still up 5.9% in the past 12 months. The ETF also saw a record high in November 2021.

Trailing P/E and P/B ratios are 21.57x and 4.05x. Given the current geopolitical issues and worries over inflation, it is impossible to know how the rest of the year could shape up for most stocks in MOAT.

However, potential investors with a two- to three-year horizon could consider buying the dip in this thematic ETF. Investing in a specialized fund like MOAT requires taking the long view and staying the course.

Finally, readers may also be interested to know that VanEck offers two other similar funds that invest in companies with wide moats. They are:

  • VanEck Morningstar ESG Moat ETF (NYSE:MOTE)—down 13.2% YTD;
  • VanEck Morningstar International Moat ETF (NYSE:MOTI)—is down 6% YTD (around half of the portfolio comes from China, the UK, and France).

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