Billionaire and superinvestor Warren Buffett knows a good deal when he sees one. Not only does he boast enviable power to cut a great deal but also unparalleled financial resources to do so. In his decades of investing, Buffett has concentrated on stocks as his securities of choice. But if he were to stray from his first love and flirt with exchange-traded funds, what ETFs might he find himself tempted by?
In observing Buffett, we know that he likes simple businesses with proven business models, essentially companies that he can hold in his portfolio forever. And the man likes good value. After all, he’s a value investor who salivates over a juicy spread between a stock’s current price and its intrinsic value.
So let’s take a look at a few ETFs that could be considered Warren-worthy and examine why each of these might rouse a twinkle in his eye.
SPDR Dow Jones Industrial Average ETF (NYSEMKT:DIA) Without a doubt, Warren Buffett is a blue-chip stock investor. According to his most recent annual shareholder letter, Berkshire Hathaway Inc. (NYSE: BRK.A) holds multibillion dollar positions in five of the 30 companies that make up the Dow Jones Industrial Average. These include corporate bellwethers International Business Machines Corp. (NYSE:IBM) and The Procter & Gamble Company (NYSE:PG), which have existed for a combined 277 years, through countless wars, recessions, and natural disasters. In fact, IBM and P&G make up more than 15% of this State Street Corporation (NYSE:STT) SPDR Dow Jones Industrial Average ETF.
As a man who likes to save his pennies, Buffett would applaud this ETF’s low annual expense ratio of 17 basis points. Even though he doesn’t favor returning money to his own Berkshire shareholders in the form of dividends, he’d likely find this ETF’s 2.4% dividend yield fairly enticing. Since he also likes companies that boast a long track record of success and have tenure in the business, he’d probably approve of this ETF, as it’s traded for 15 of the 20 years that ETFs have existed.
Consumer Staple Select Sect. SPDR (ETF) Buffett’s proclaimed love of Cherry Coke and hamburgers indicate that he’s a man of simple tastes. This ETF tracks an index that includes companies from some of his favorite industries, like food and beverage, staples retailing, household goods, and personal products. His recent H. J. Heinz Company (NYSE: HNZ) deal proves his affection for savory pleasures, both for the taste buds and the bank account.