Mary Buffett

Mary Buffett

After Mary Buffett divorced one of the sons of the world-famous investor Warren Buffett in 1993, she wrote a very insightful exposé of Mr Buffett’s investment style. Together with portfolio manager and friend David Clark, Ms Buffett co-authored Buffettology and four subsequent books with worldwide sales topping 1.5 million. The accomplished author has also held teaching positions in the field of business and finance at several Californian state universities and worked for Fortune 500 companies. 

Summary

Buffettology seeks to explain to the person in the street exactly what Mr Buffett’s investing style is, since he does not talk actively about his strategy. In her examination of the famous investor, Ms Buffett reveals that her former father-in-law is a value investor focused on companies in industries and with products and services that are easy to understand. Here are some of what she describes as the intrinsic qualities of Mr Buffett’s favourite investments:

  • Intrinsic value is the most important – the ability of a company to generate earnings and Dividends without taking on debt
  • Proof of an ‘enduring moat’, which makes a takeover bid nearly impossible
  • Durable competitive advantage
  • Consumer monopoly due to brand strength or patent
  • Ability to adjust prices easily for inflation

Success Formula Buffettology

  1. MktCapM is >= US$ 300 million (basis year 2000) adjusted yearly
  2. Current Op Mgn % is >= industry’s current median
  3. Current Net Mgn % is >= industry’s current median
  4. 3y EPS growth % from Continuing Operations is >= 7y EPS growth % from Continuing Operations
  5. Latest filing RoE% is > 12%
  6. 7y average RoE% is > 12%
  7. LT debt < 5xEarnings
  8. Take the top 50 stocks with the highest 7y EPS growth % from Continuing Operations.

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

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