It is the end of a career that has sparked thousands of imitators, including some home-grown fund managers in the UK. So, who can offer a bit of Buffett magic in a handy UK-based fund?
Apart from his long and successful investment career, Buffett had a sideline in pithy quotes. A few of his best include: “Rule number one is never lose money. Rule number two is never forget rule number one.” Or: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” Or: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.
These quotes encapsulate his philosophy. From Apple, American Express, Coca-Cola, Bank of America, and Chevron, his philosophy was to buy great companies and hold them forever. For those who like this style, we would suggest the BlackRock Global Unconstrained Equity Fund.
This is a concentrated, high-conviction portfolio of quality companies, with strong growth prospects and durable future-proof earnings. Its holdings have a similar feel to Buffett’s favourites: Verizon, Progressive Corporation, American Electric Power, Cigna and Procter & Gamble.
Of course, there are also other gurus worth emulating. Benjamin Graham, for example, was the “father of value investing”.
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He also did a good line in pithy quotes. “The intelligent investor is a realist who sells to optimists and buys from pessimists,” or the famous: “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”
Graham also has many imitators, with value investing firmly established as a way to deliver strong performance over time. The value team at Schroders remains among the most successful proponents of this approach, delivering strong returns even when the style is out of favour.
The group runs the Schroder Recovery and Income funds. For a global option, Ranmore Global Equity has a similar flavour.
Sir John Templeton is styled as the great contrarian. If everyone in the market is zigging, an investor needs to zag. His favourite line? “You can’t outperform the market… if you buy the market”.
The theory of being a contrarian is that you will tend to buy opportunities that are overlooked and sell when the market has woken up to their potential. However, it takes nerves of steel, because you will often be in conflict with the prevailing market wisdom.
The TM Redwheel Global Equity Income Fund, managed by Nick Clay, takes this kind of approach. He says: “It’s not about needing to be contrarian simply for the sake of it; in order to make money, it’s about avoiding getting caught up in the herd at the wrong point in time. The herd can certainly be right, but when it comes to extremes, that’s when you have to be especially wary.”
Peter Lynch was another of the greats. He was famous for managing the Magellan fund at Fidelity Investments, where he averaged a 29.2% annual return between 1977 and 1990.
His approach proved so popular that in his time at the company, the fund grew from just $18m to over $14bn. He was famous for coining the term “10-bagger” – a stock that delivers 10x its original investment.
‘One up on Wall Street’
He was also a value investor, but with a twist. He outlined his philosophy in ‘One up on Wall Street’ and popularised the idea of ‘investing in what you know’. He believes individual investors can learn from their personal experiences, finding promising opportunities before they attract the attention of Wall Street. He famously invested in Dunkin Donuts after being particularly impressed with its coffee.
A modern equivalent might be the Morgan Stanley Global Brands Fund, which invests in familiar names with strong brand value. Its top holdings include Microsoft, SAP SE, Visa, L’Oréal and Aon. This is also a conviction-based approach, with just 25-30 holdings and more than half of its assets in the top 10 names.
Many of these gurus are now retired (or, in some cases, expired), but in most cases, they have shaped the investment world, creating whole new investment philosophies that endure well beyond their investing lifetimes.
In some cases, their imitators have gone on to improve and refine their ideas, adapting them to changing modern markets and a new opportunity set. Investors could do a lot worse than following those who follow the gurus.
Juliet Schooling Latter is research director at FundCalibre
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Juliet’s views are her own and do not constitute financial advice.
