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Invest Like Warren Buffett With These ETFs

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These funds offer up Buffett-like exposure but at a fraction of the risk and overall cost as Berkshire Hathaway.

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These companies generally have a huge advantage on one of the following five factors; intangible assets/brands, switching costs, network effects, cost advantages, or efficient scale. Any of these factors, or even a combination of them, generally can provide companies with a barrier against others, just like a moat.

Warren has definitely utilized this in his investing strategy over the years, targeting extremely wide moat companies for not only outright purchase, but investment as well. Some of the more well-known wide moat investments of Berkshire include Coca-Cola (NYSE:KO) -intangible assets, American Express (NYSE:AXP)-network effect, and International Business Machines (NYSE:IBM)-switching costs.

In order to target a basket of wide moat firms, investors have a few choices at their disposal although the Market Vectors Morningstar Wide Moat Research ETF (NYSEARCA:MOAT) is arguably the best choice.

This relatively new ETF tracks the Morningstar Wide Moat Focus Index which is a benchmark of 20 companies that have sustainable competitive advantages. Furthermore, the index only looks at the most attractively priced ones, ensuring a focus on deep value securities.

Currently, the basket consists of a number of firms in the tech, materials, industrials, and financials sectors, with firms that have an advantage on the cost front comprising much of the portfolio. MOAT also zeroes in on large caps for the most part-suggesting a low level of volatility-although mid caps also make up roughly one-fourth of the assets as well.

Volume and AUM are still pretty light for this product, as it is still less than a year old. Still, the product charges a reasonable 49 basis points a year in fees and it has handily outperformed the S&P 500 since its inception, suggesting that there may be something to the strategy in ETF form.

Transportation Stocks

Another wide moat business is that of the transportation sector. Competition is oligopolistic as barriers to entry are extremely high, both in the general delivery business and especially in the railroad sector.

After all, the building, buying, and maintenance of a massive railroad empire isn't something that anyone can start in a short period of time. It is a very capital intensive endeavor, especially if one is looking to build one that can traverse across vast distances of the American landscape.

Probably due to this, the railroad industry has always intrigued Buffett as he was a major investor of Burlington Northern Santa Fe for quite some time, and he had a modest holding in Union Pacific as well. Then, Warren went 'all in on the American economy' buying up the rest of BNSF in a $44 billion deal that cemented Buffett's love of the train industry.

While there isn't a pure railroad ETF at this point in time, investors still have a popular transport ETF in the form of the iShares Dow Jones Transportation Average ETF (NYSEARCA:IYT).
No positions in stocks mentioned.
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