An Equity Strategy Based on the Master s Principles

Transcription

1 An Equity Strategy Based on the Master s Principles

2 Warren Edward Buffett is an American business icon, investor, and philanthropist. He is widely considered the most successful investor of the 20th century. Buffett is the chairman, CEO and largest shareholder of Berkshire Hathaway and consistently ranked among the world's wealthiest people. Buffett is called the "Oracle of Omaha and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth. Berkshire Hathaway s investment style is what we offer through quantitative investment modeling.

3 ( yrs, 1/x= ) Since Jan 1999 to June 9, 2014: Buffett Model returned % versus % for SPY. Annualized return of model 14.03% of S&P500 ETF 4.87% Annualized outperformance is 8.87% per year.

4 Significant outperformance during volatile or down markets.

5 Three important investment criteria: fair valuation solid company fundamentals and reasonable consistency. Berkshire Hathaway performance and outperformance: from 1965 through 2013 Berkshire Hathaway returned 19.7% versus S&P %; historic outperformance is approximately 9.9% per year.* from 1999 through 2013 Berkshire Hathaway returned 9.23% versus S&P %; outperformance 2.64%.* Our Warren Buffet Model performance and outperformance: from 1999 through 2013 our Warren Buffett model returned 14.03% versus S&P %; outperformance is 8.87% per year. 8.87% outperformance versus 2.64% outperformance of Warren Buffett Model versus Berkshire Hathaway. Over 6% higher outperformance versus Berkshire Hathaway since *Berkshire Hathaway Annual Report. Portfolio 123, see performance disclosures on last page.

6 Quantitative Prerequisites: Pass liquidity tests Market cap between of at least $250 million Industry does not exceed 25% of total portfolio Not be in an industry whose financial characteristics we deem incompatible with fundamental screening and ranking Meet various test relating to financial strength, return on capital and consistency of performance. Qualitative Strategy Don t lose money. Buy durable franchises at a good price.

7 The portfolio holds approximately 20 stocks and is rebalanced every four weeks.

8 TYSON HALSEY, CFA Winner USA Today-CNBC National Investment Challenge.* Conferred CFA designation Halsey has managed Master Limited Partnership (MLP) portfolios for over 13 years. Halsey has been using quantitative investment strategies for nearly a decade. Employed by Merrill Lynch, Alex. Brown & Sons, Deutsche Bank Alex. Brown: Financial services professional since Exposure to some of the most talented and recognized fund managers in the world. Founded Halsey Advisory and Management, LLC in MANAGING MEMBER OF INCOME GROWTH ADVISORS, LLC Registered Investment Advisor, Charleston, SC. Focused on securities with growing income profiles. Strategies designed to enhance retirement income. ADV available at SEC.gov. Income Growth Advisors, LLC 234 Seven Farms Drive, Suite 123-C Daniel Island, SC th@incomegrowthadvisors.com *USA Today/CNBC National Investment Challenge, options division Q1 1992, paper trading, 1078% for quarter.

9 OUR WARREN BUFFETT MODEL The Warren Buffett model was developed by a leading quantitative analyst and author Marc Gerstein a former analyst, editor, and Assistant Research Director at Value Line; Marc was the first analyst anywhere to initiate regular coverage of Berkshire Hathaway back in the late 1990s. We pay an annual fee to subscribe to the quantitative service. The model is back tested. That means the actual returns are not real portfolios, but returns that would have resulted from the rules based quantitative methodology developed by the analyst. Portfolio123's Models represent hypothetical or simulated performance, not actual trading. Since the trades have not actually been executed, the results may have under-or-over compensated for the impact of certain market factors, such as liquidity. Remember that past returns are no guarantee of future returns BERKSHIRE HATHAWAY We compare Berkshire Hathaway to the S&P 500. We use the S&P 500 ETF(Exchange Traded Fund) symbol SPY to reflect the return of the S&P 500. There is slippage or performance differences between the S&P 500 and the ETF. We derive our performance numbers from the Berkshire Hathaway annual report. These numbers are calculated using a simple arithmetic average not geometrically linked.

10 BERKSHIRE HATHAWAY PERFORMANCE FROM ANNUAL REPORT WARREN BUFFETT STRATEGY RETURNS THROUGH JUNE 2014 Performance comparison illustrates Berkshire Hathaway for The Warren Buffet model shows June The time differential has di minimus impact on analysis.