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Follow The Leader Investing

Many investors pay a coach to tell them how approach investments and how to go about the fundamental analysis necessary to make good investments. The point is that you do not have to learn from your own mistakes. You can learn from the mistakes and the successes of others. You might call this follow the leader investing. One person who is commonly held up as a good example is Warren Buffett, the so called Oracle of Omaha. Mr. Buffett runs Berkshire Hathaway (BRKA) and is its largest investor. This company engages in value investing. Mr. Buffett looks at the intrinsic value of stocks and looks for stocks with a margin of safety. He tends to stick with well-established companies that he believes are undervalued. He then takes large positions in these companies. We can look over the shoulder of this man and use his investment positions in our game of follow the leader investing. This is possible because investment managers like Mr. Buffett must file a 13-F form with the Securities and Exchange Commission every quarter. From the Berkshire Hathaway filing we can see the top ten investments in the company portfolio, the value of each separate holding and the ROI on that stock since the beginning of the year.

Berkshire Hathaway Investments (as of August 2013 13 F Filing)
Stock Value of Current Holding ROI to Year to Date
Wells Fargo (WFC) $19.1 Billion 25.2%
The Coca-Cola Company (KO) $16.04 Billion 7.6%
International Business Machines (IBM) $13.02 Billion -3.1%
American Express (AXP) $11.33 Billion 30.9%
Procter & Gamble (PG) $4.06 Billion 17.7%
Wal-Mart (WMT) $3.67 Billion 8.6%
U.S. Bancorp (USB) $2.83 Billion 15.7%
DIRECTV (DTV) $2.3 Billion 18.9%
DaVita HealthCare Partners (DVA) $1.81 Billion 1.5%
Moody’s Corporation (MCO) $1.52 Billion 28.3%

 

If you calculate the ROI on the top ten holdings of Berkshire Hathaway for the year to date it comes to 15.20%. For sound investment advice listening to the Oracle of Omaha is not a bad choice to use for follow the leader investing.

Follow The Leader Investing With Mr. Buffett

Here are three quotes and a bonus.

Price versus Value

Mr. Buffett once quoted his old mentor, Ben Graham a saying that price is what you pay and value is what you get. Buffett went on to say that. Whether we’re talking about socks or stocks I like buying quality merchandise when it is marked down.

Regarding the twin demons of fear and greed:

Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.

Investment versus Speculation

The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.

Bonus Follow The Leader Investing Quote

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

In successful follow the leader investing, learn from the pros, find practical investments and then always do your own homework!

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