Market Vectors ETF Trust (MOAT), iShares Trust (QUAL), Direxion iBillionaire Index ETF (IBLN): Almost, but not Quite Like Warren Buffet

An Exchange-Trade Fund (ETF), just like an index fund, tracks an index, a basket of assets or a commodity, but trades as a stock on an exchange.  Bloomberg’s Eric Balchunas discussed the most ‘Warren Buffett-esque’ ETFs: Market Vectors ETF Trust (NYSEARCA:MOAT), iShares Trust (NYSEARCA:QUAL), and Direxion iBillionaire Index ETF (NYSEARCA:IBLN). These funds rely on different approaches to building up their portfolio, but tend to arrive at somewhat similar results.

Berkshire Hathaway

For start, there’s no Warren Buffett ETF, consequently we can be just close to making the same stock picks, but not identically precise. For example, a good approximation is Market Vectors ETF Trust (NYSEARCA:MOAT) that looks through 1,500 companies,  of which 10% receive a wide moat categorization, then only 20 with the best valuation (low price – good performance) are selected to compose the index. With only six overlaps compared to Berkshire Hathaway Inc. (NYSE:BRK.B)‘s choices, it’s not the best approximation and it further deviates as its turnover is of about 100%, but Market Vectors ETF Trust (NYSEARCA:MOAT) acts like a good enough approximation.

Following next is iShares Trust (NYSEARCA:QUAL), which tries to depict factors that cause changes in the market’s alpha (a measure of performance on a risk-adjusted basis).

“[…] Alpha can come from small cap tilts, momentum, volatility, so this one [iShares Trust (NYSEARCA:QUAL)] is an ETF that looks for characteristics in stocks that exhibit quality. It looks for return on equity, earnings growth, and low debt, things Buffett likes. […] It’s a Buffett philosophy, but not exactly Buffet,” said Eric Balchunas.

The last, but not least is Direxion iBillionaire Index ETF (NYSEARCA:IBLN), which looks at the top 10 best performing billionaires, Warren Buffett being the 11th is not in the list. The ETF analyses 13F filings and the overlapped stocks to put a portfolio together. There’s neither an economic formula nor a valuation concept behind the picks made by Direxion iBillionaire Index ETF (NYSEARCA:IBLN), but it relies on the intuition of the best investors, which in most of the cases can help you a lot, but will not be able to guarantee a progress like Berkshire Hathaway Inc. (NYSE:BRK.B)’s.

Disclosure: none