Warren Buffett's hidden portfolio

We make no bones about our admiration for Warren Buffett. Truth be told, it springs from a purely selfish motive. The fact that there is a lot one can learn about investing from him. But people sometimes ask us how relevant he is for individual investors. After all, as the head of a gigantic company, isn't he in a different league? He gets deals nobody else can. Our answer is yes and no.

True, the financial might of Berkshire Hathaway does help Buffett bag unusually attractive deals. As we saw during the height of the financial meltdown. But a large portion of his investment style is extremely relevant for small investor even here in India. Take Buffett's investing method in his personal portfolio. That's right, he maintains a personal portfolio. At US$ 1.8 bn, that's a huge fund by most standards (but not by Buffett's). Hence, he has to periodically disclose it to the US regulators.

So, what does Buffett's personal portfolio look like? 

• It is a concentrated portfolio of about 10 stocks. 
• Just 5 stocks make 75% of the portfolio value. 
• Most of them in 'old economy' sectors like banking, FMCG, retail, oil & gas and logistics. 
• Almost all of these companies are really old - founded at least a century back. 
• Most of them have diversified very little from their core area. 
• They are all recognized brand names and have a sustainable competitive advantage. 
• The portfolio generates a dividend yield of 2.3%. 

This does fly against the notion of hot-shot investing, doesn't it? But really, Buffett's portfolio is not beyond the reach of individual investors willing to do their homework and exercise discipline. 


http://www.equitymaster.com/5MinWrapUp/detail.asp?date=3/26/2010&story=1

Lessons from Warren Buffett