What are we looking for?
Back in May, we created a portfolio inspired by the stock-picking methodology of Warren Buffett. Let’s check in to see how it’s faring.
We used Validea Canada’s “Patient Investor” screen, which is based on the book Buffettology, written by Mr. Buffett’s former daughter-in-law, Mary Buffett.
The screen “is the only one of our strategies that is not taken directly from the writings of the guru himself, as [Mr.] Buffett has yet to write about his investment strategies” in detail, Validea says. We used the screen to look for Canadian stocks. Globe Investor has a joint venture with Validea.ca, a premium Canadian stock screen service.
More on the methodology
Mr. Buffett aims to buy solid businesses at “fair” prices and often holds stocks for decades, Coca-Cola and American Express being two examples. He summed up his investing philosophy in his 1996 letter to Berkshire shareholders: “Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, 10 and 20 years from now.
“Over time, you will find only a few companies that meet these standards – so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
The 11 stocks in the table are those that scored highest based on the book’s interpretation of Mr. Buffett’s strategy. We allocated a hypothetical $10,000 to each stock.
From May 23 through Oct. 3, nine of the 11 stocks gained ground, led by a 17-per-cent advance for convenience store operator Alimentation Couche-Tard. However, the portfolio’s gain of 5.7 per cent trailed the S&P/TSX composite’s advance of 6.9 per cent over the same period. Both figures exclude dividends.
Remember that a stock screen is only a first step, and that you should study individual companies carefully before you invest. We’ll check back in a few months to see how the portfolio is doing.
How a Buffett-inspired portfolio has fared since late May
|Company||Symbol||No. of shares/units||Recent price $|
|Bank of Nova Scotia||BNS-T||193.5||53.87|
|Computer Modelling Group||CMG-T||588.2||19.36|
|Home Capital Group||HCG-T||229.3||49.42|
|MTY Food Group||MTY-T||583.1||19.15|
|National Bank of Canada||NA-T||136.6||74.36|
Source: GlobeInvestor.com; Validea.ca
|Company||Symbol||No. of shares/units||Recent price $||Mkt. value $||Total cost $||Unrealized gain/loss $||Unrealized gain/loss %||% of portfolio|
|Bank of Nova Scotia||BNS-T||193.5||53.87||10,423.76||10,000.00||423.76||4.2||9|
|Computer Modelling Group||CMG-T||588.2||19.36||11,388.24||10,000.00||1,388.24||13.9||9.8|
|Home Capital Group||HCG-T||229.3||49.42||11,332.26||10,000.00||1,332.26||13.3||9.7|
|MTY Food Group||MTY-T||583.1||19.15||11,166.18||10,000.00||1,166.18||11.7||9.6|
|National Bank of Canada||NA-T||136.6||74.36||10,155.70||10,000.00||155.7||1.6||8.7|
|Total $ Stocks||116,248.33||110,000.00||6,248.33||5.7||100|
- Alimentation Couche-Tard Inc$55.000.00(0.00%)
- Bank of Nova Scotia$65.800.00(0.00%)
- Computer Modelling Group Ltd$10.040.00(0.00%)
- Home Capital Group Inc$37.590.00(0.00%)
- MCAN Mortgage Corp$13.450.00(0.00%)
- MTY Food Group Inc.$33.140.00(0.00%)
- Metro Inc$41.990.00(0.00%)
- National Bank of Canada$44.840.00(0.00%)
- Saputo Inc$39.450.00(0.00%)
- Updated April 29 4:00 PM EDT. Delayed by at least 15 minutes.