By Gary Brooks, CFP
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At Dataroma.com the investment holdings of 63 “Super Investors” are tracked and aggregated to show stocks these elite investors own and what stocks they have bought and sold recently. This Super Investors include Warren Buffett and many prominent mutual fund managers as well as several private capital hedge fund managers. Most do not report their holdings in real time. There can be a 3-month lag for many of the holdings. And the site only tracks current holdings and activity over the past six months.
You might think that aggregating the collective wisdom of these investors would reveal great insight. But investing is tricky. Performance can be fleeting and the most high-profile companies rarely record the best stock performance.
Among these 63 Super Investors, the most widely held stock is Microsoft (21 Super Investors owned it as of their latest reporting). The largest position by weight is Wells Fargo (2.4% of the combined Super Investors portfolio, held by 16 investors).
You don’t have to invest like a Super Investor to be successful, however. And you don’t have to invest in the most recognizable corporations or those with the most compelling innovation or future growth expectations. Sometimes, great returns are found in boring, often overlooked stocks.
In the chart below, the yellow line at the bottom (SPX) represents the S&P 500 Index of U.S. stocks over the 10 years from March 30, 2006 through March 29, 2016. During that period, the S&P 500 price appreciated 57.73% despite the 53% decline from October 2007 through March 2009. Many stocks outperformed this broad index over the full period. This example isn’t meant to isolate three that were the absolute best. It just picks three that happened to do very well, that aren’t widely owned by the identified “Super Investors” and that could be considered unattractive from the standpoint of interest in their business.
The orange line is Hormel, the maker of Spam. Hormel gained 432.85% compared to the S&P 500’s 57%. The blue line is Church & Dwight (393.26%), maker of Arm & Hammer, Oxi Clean and other products you likely have in your home. The red line is JM Smucker Co. — 226.63%.That’s right, you could have had four times the return of the S&P 500 return over the past 10 years by investing in jam.
In reviewing the top 500 holdings of the Super Investors, Smucker and Hormel are each owned by two of the 63 Super Investors combining for 0.10% weight in the Super Investor portfolio. Church & Dwight is not currently among the top 500.
While it’s interesting to see what these Super Investors own, their collective insight almost certainly does not represent the most rewarding path forward. While they sift through haystacks looking for needles, they will miss some great opportunities.
This is why it is so important, at least at the core of your investment portfolio, to invest in the whole market at the lowest possible cost. It’s the only way you’re guaranteed to participate in the companies like Hormel, Smucker and Church & Dwight. Sure you’ll also own many others that don’t do as well, but on balance, over time, the collective winners can reasonably be expected to outweigh the losers and contribute to building your financial security.
Past performance is not indicative of future returns.
The S&P 500 Index represents U.S. large company stocks.
~ BHJ Wealth Advisors — Gig Harbor, Washington