What are we looking for?
Back in May, 2012, we created a Canadian portfolio based on the stock-picking methodology of Warren Buffett. With Mr. Buffett’s Berkshire Hathaway disclosing this week that it bought a stake in Suncor Energy, now’s a good time to check in with our portfolio (which doesn’t include Suncor, in case you were wondering).
We used Validea Canada’s “Patient Investor” screen, which is based on the book Buffettology by Mr. Buffett’s former daughter-in-law, Mary Buffett. Globe Investor has a joint venture with Validea.ca, a premium Canadian stock screen service.
The 11 stocks in the portfolio are those that scored highest as of May 23, 2012, based on the book’s interpretation of Mr. Buffett’s strategy. We “invested” $10,000 in each stock.
More on Buffett’s methodology
Mr. Buffett tries to buy great businesses at “fair” prices and invests for the long run. He summed up his 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.”
From May 23, 2012, through Aug. 14, 2013, nine of the 11 stocks rose, led by an 85.2-per-cent advance for quick-service restaurant franchisor MTY Food Group, the company behind such brands as Mr. Sub, Country Style and Cultures. Over all, the portfolio gained 25.1 per cent (excluding dividends).
That’s an impressive return compared with the S&P/TSX composite index’s gain of 9.3 per cent over the same period (also excluding dividends). Remember that a stock screen is only a first step in investing. Be sure to research individual companies thoroughly before you buy their securities.
Validea Canada's 'Patient Investor' screen
|Bank of Nova Scotia||BNS-T||193.5||58.26|
|Computer Modelling Group||CMG-T||588.24||24.40|
|Home Capital Group||HCG-T||229.31||64.14|
|MTY Food Group||MTY-T||583.09||31.77|
|National Bank of Canada||NA-T||136.58||77.80|
Prices as of Aug. 14. Returns are from May 23, 2012, through Aug. 14, 2013. Source: Globe Investor; Validea.ca
|Bank of Nova Scotia||BNS-T||193.5||58.26||11,273.22||10,000.00||1,273.22||12.7||8.2|
|Computer Modelling Group||CMG-T||588.24||24.40||14,352.94||10,000.00||4,352.94||43.5||10.4|
|Home Capital Group||HCG-T||229.31||64.14||14,707.64||10,000.00||4,707.64||47.1||10.7|
|MTY Food Group||MTY-T||583.09||31.77||18,524.78||10,000.00||8,524.78||85.2||13.5|
|National Bank of Canada||NA-T||136.58||77.80||10,625.51||10,000.00||625.51||6.3||7.7|
|WaterFurnace Renewable Energy||WFI-T||617.28||21.04||12,987.65||10,000.00||2,987.65||29.9||9.4|