Funds that Buy Like Warren Buffett

After the Berkshire Hathaway annual meeting, we look at the fund's top 10 holdings and which UK funds follow the Oracle of Omaha

James Gard 5 May, 2021 | 9:53AM
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Warren Buffett

Warren Buffett's successor was announced at the 2021 Berkshire Hathaway annual shareholder meeting at the weekend. Morningstar analysts had expected 59-year old Greg Abel, who runs Berkshire's non-insurance division, to be the most likely candidate to take over from the Oracle of Omaha. The announcement "removes one of the major uncertainties hanging over the company", says Greggory Warren, who attended the virtual meeting.

The meeting always brings scrutiny of what Buffett holds in the portfolio, with Apple still the number one stock. While the Berkshire Hathaway approach is unique, are there any parallels with what UK fund managers own?

Using the latest regulatory filings, we have looked at Berkshire Hathaway’s top 10 holdings by size and found the UK-based funds with similar stocks. While Warren Buffett's Berkshire is listed as a company, it operates as a “best ideas” fund of more than 50 names and has a market cap of over $600 billion (this has grown from $500 billion since last May). We have looked at UK active funds rated by Morningstar Analysts as Neutral and above where the stock accounts for more than 3% of the fund's assets (excluding BYD and Kraft Heinz, where this doesn’t apply).

Where possible, UK-based index funds are excluded from the screen because Apple, Buffett’s biggest holding, already has the largest weighting in the Dow Jones Industrial Average and dominates global trackers (Morningstar’s Dan Lefkovitz analyses the index implications of Apple’s size here and why it causes problems for active managers). Otherwise, the list of UK funds holding Apple would all be trackers.

We’ve gone through the top 10 holdings and matched them up with the UK funds with the biggest allocation to each stock. We conducted the same exercise a year ago, and while the Berkshire managers are known for their conservative approach to portfolio construction, there are some notable changes.

Berkshire Hathaway portfolio

What Stocks Does Berkshire Hathaway Hold?

Looking at the biggest holdings in the Berkshire Hathaway portfolio, the top four remain unchanged from a year ago: Apple (AAPL), Bank of America (BOC), Coca-Cola (KO) and American Express (AXP). At the lower end of the table, Kraft Heinz (KHC), Moody’s (MCO) and US Bancorp (USB) hold their positions, but telecoms giant Verizon (VZ), oil firm Chevron (CVX) and Chinese electric vehicle maker BYD (BYDDF) make it into the top 10. US banks Wells Fargo (WFC), JP Morgan Chase (JPM) and Bank of New York Mellon (BK) shuffle out of the top 10 as part of Buffett’s move last year to reduce exposure to US banks. Tesla rival BYD stands out as the only non-US company in the top 10 and has featured as one of our Chinese stocks to watch in 2021 and as part of our series on disruptors.

BYD’s New York listed shares are also owned by ARK Autonomous Technology & Robotics (ARKQ), a US ETF owned by a fund house that has received a flood of new investor money this year (John Rekenthaler explains the ARK phenomenon in detail in a recent column). No UK active funds own BYD’s US shares, but the China-listed equivalent “A Shares” (002594) are held in tiny quantities by emerging market and index funds. One of which is the Vanguard FTSE Global All Cap Index, which has a Morningstar Quantitative Rating of Gold.

In terms of Morningstar categories, three of the stocks in the Berkshire top 10 are Large Growth, five are Large Value and the remainder are Large Blend, which is as you would expect for a fund run along contrarian lines.

UK fund holdings

Five of the funds that mirror the Berkshire holdings have Ratings of Silver and above, three are rated Neutral and two have a Negative MQR. One of the funds directly rated by Morningstar analysts is Jupiter Merian North American Equity, which has a Silver Rating. "The strategy has managed to successfully navigate several of the most recent challenging periods for active managers," sats analyst Fatima Khizou. The fund returned more than 15% in 2020 and is up 7.6% in the year to date, ahead of the US Flex-Cap Equity Morningstar category and the benchmark, the Russell 3000 total return index. The top five holdings in the fund are Apple, Microsoft, Amazon, Alphabet and Facebook, all of which have been upgraded by analysts after forecast-beating Q1 earnings.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard  is content editor for Morningstar.co.uk