Buffett is one of the world’s richest people, with assets of $73 billion. The source of this fortune is stock market investments through a company called Berkshire Hathaway.
Numerous of the best known investors in the UK market, such as Neil Woodford and Nick Train, have, in their own way, built an investment strategy around the strategy pioneered by Buffett.
This strategy centres on buying large, well established, and well known companies, rather than trying to gain advantage to interpretation of the health of the wider economy.
Mundy is a fund manager who pursues a style of investing that is more ‘value’ oriented, that is, buying companies that are out of favour. The investor believes that a central problem for investors seeking to emulate Buffett is that lots of fund managers are trying to do it, elevating valuations.
He commented, ‘Over many years I have found myself sharing platforms with other fund managers enthusiastically selling their wares. It is always enjoyable and thought provoking to hear others’ views, but just as interesting to watch various patterns emerge. As well as patterns and trends in strategies presented, there are also patterns in investing styles. In years gone by, most fund managers would profess to blending a macroeconomic view with a bottom-up stock-picking approach. This is now less trendy – or at least less trendy to admit to – and bottom-up is the flavour of the day.’
Mundy continued, ‘However, what has become even more apparent is the current trend of investing like Warren Buffett. Obviously, it is dangerous to criticise anyone seeking to emulate the Sage of Omaha, but it is tempting to believe we have reached ‘peak Buffett’. The books have all been read, the screens have been constructed and the Kool-Aid drunk. This search for companies with supposedly unassailable advantages raises two, quite probably inter-connected, issues. Firstly, once signed up as a Buffett acolyte, there is not much wriggle room on what stocks to own. So something has to give – either the price paid, as demand for the perfect stock outstrips supply, or the stock – as the ‘Buffett-type stock’ tag is handed out far too liberally.’
Mundy continued, ‘Secondly, Buffet’s recent actions suggest he may have moved on, with much of his recent, high profile, activity more involved with for example, taking mezzanine positions in private equity deals. Maybe this reflects the massive deals he needs to do to move the performance needle or perhaps we are receiving a skewed view of what he is actually doing across his whole portfolio, but it does at least make one wonder if he believes that the market for his typical investment is currently far too crowded. Buffett’s investment style has of course been great to follow over many years, but like all styles it has its good and not so good times. The good times for Buffetologists in the last few years have, not surprisingly, coincided with not so good times for Value investors…perhaps thius period of time is now behind us.’
The £1 billion Temple Bar Investment Trust is the absolute top performer in the AIC UK Equity Income sector over the past year, returning 22 per cent. The trust trades at a discount to net assets of 5.5 per cent.