Robert Hagstrom

Robert Hagstrom

Robert G. Hagstrom has had an extensive career in investing. The Villanova University graduate is also a designated CFA and currently the Chief Investment Strategist at Legg Mason Investment Counsel. Hagstrom has also written eight books on the topic of investing, including the New York Times bestseller The Warren Buffett Way and The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy.

Summary

As the titles of Hagstrom’s two most popular books suggest, he believes that Warren Buffett’s strategy and success in investing can be replicated. He has created a group of seven criteria for investing, which he believes mimics the Buffett approach to investing:

  • Simple understandable business
  • Consistent earnings power
  • Good return on equity
  • Little or no debt
  • Good management
  • $5 to $20 billion in size (the larger the better)
  • Avoidance of turnarounds and hostile takeovers.

Along with these criteria, Hagstrom also believes in making concentrated investments and not holding more than 20 stocks. He is also adamantly against investing in marginal companies, even when cash is readily available.

Success Formula Warren Buffett Way

  1. MktCapM is >= US$ 1 billion (basis year 2000) adjusted yearly
  2. Operating income for the last 4 FQ is > 0
  3. Operating income for the last 7 FY is > 0
  4. Latest filing RoE% is > 15
  5. Minimum yearly RoE% over the last 3 FY is > 15
  6. P/B ratio growth over 5 FY is < 0
  7. Latest filing Pre-tax profit margin % is > industry median
  8. Latest filing Op Mgn % is > industry median
  9. Latest filing Debt to Equity ratio is < industry median
  10. Take the top 100 stocks with the lowest current P/CF ratio

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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