There
are very few words that can stir up emotions on Wall Street these day. Warren
Buffett is one of them. And more importantly what billionaires like Mr. Buffett
are doing. While we have the Internet at our fingertips and the Global X Guru
Index ETF (GURU),
very few resources account for and more specifically track the stock holdings
of some of the most wealthiest and successful investors. Until now with the
concept of iBillionaire Index ETF (IBLN).
The
IBLN tracks the stock holdings of billionaires like Mr. Warren Buffett, David
Einhorn and Carl Icahn. With the help of billionaires lists compiled by Bloomberg and Forbes, a list of 20 or so U.S.-based billionaire investors have
been identified. From these 20 or so individuals, a more precise list of 10 is
composed detailing the top 10 billionaires by performances. These performances
are judged by looking at filings referred to as the 13Fs that investors
overseeing more than $100 million in U.S. equities must file within the
Securities and Exchange Commission. The filings list equity holdings that are
on the U.S. exchanges. The collective 30 stocks where the investors have the
most combined money then becomes the ETF index.
If
we look at last year, for instance, we will see that Apple Inc. was the
favorite stock pick for the first quarter. According to Bloomberg, Apple made up 16% of Mr. Einhorn’s reported holdings and
about 12% of Mr. Icahn. These were just the few big names. The next popular
stock was Micron Technology Inc. It had a combined exposure of 18.8% and
Priceline Group Inc. at 14%. The list of 30 stocks are equal weighted with each
one making up 3.3% of the index.
Experienced
investors might think of IBLN as being similar to GURU. And to be honest, that
is fair. One of the biggest differences is that GURU looks through dozens of
hedge fund portfolios and IBLN is concerned only with looking at portfolios of
the richest and most successful investors. Besides this, the truth is there are
only a few differences. For instance, IBLN
only accounts for the large-capitalization U.S. stocks while GURU (has $500
million in assets) will look at small and mid cap stocks. Experts at Bloomberg are now claiming that the IBLN
will be less volatile than GURU, which rose 48% in 2013 outdoing the S&P
500 Index’s 32%. “So far this year — in theory, since the index wasn’t live —
the iBillionaire Index is up 7.7 percent, compared with GURU’s 2.3 percent.
However, in the past two momentum-driven years, GURU has a slight edge,
returning 75 percent to IBLN’s 67 percent. IBLN will charge 0.65 percent of
assets annually, slightly less than GURU’s 0.75 percent.” said writer Mr.
Balchunas of Bloomberg.
The
whole idea of having access to the lives of the top 1% sounds rosy but there
are some things investors should be familiarized with. Investors should be
aware that 13F filings hardly expose a full or timely picture of just how it is
that billionaires make their immense wealth. A more practical issue also
arises. The ETF tracks large-cap U.S. stocks. In essence, this means that
investors may find that its holdings overlap with other funds they own.
Disclaimer: This article was posted with the permission
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necessarily reflect those of Smallcappower. Smallcappower does not endorse
any investment advice provided by these third-party contributors.
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