How to Invest Like Warren Buffett on the Cheap

invest like warren buffet

Yesterday, Dr. Bauer noted that I would provide insight into a unique way to invest like Warren Buffett and his company Berkshire Hathaway (NYSE:BRK-A). Now, most investors don’t have $400,000 to purchase one single share of Berkshire A stock. But I can help you invest for much cheaper and benefit from a fund that replicates Berkshire’s portfolio at a stunning level of success.

We’re also talking about a portfolio of Buffett’s stocks at a 15% discount to the net asset value of the fund. And as one more bonus – a 2.9% dividend. You could buy B shares of Berkshire Hathaway (NYSE:BRK-B) that trades north of $290 per share and pays no dividend. Or you can learn about a special closed-end fund that gives us the opportunity to make money off Berkshire’s strategy. 

What’s a Closed End Fund?

A closed end fund is an alternative investment asset that trades on the public stock market. It’s like a mutual fund or an exchange-traded fund (ETF). When a fund manager launches a closed-end fund, they create a portfolio of stocks, bonds, and cash assets. The fund then sells a preset number of shares on the open market. Shares cannot be added or subtracted to the original total). 

These funds operate differently than a mutual fund, which marks their net asset value (NAV) each day. Closed end funds do not follow this practice. Instead, closed-end funds swing back and forth based on the market. Sometimes, closed-end funds will sell at a premium to the total fund’s net asset value. 

Other times, they can trade at a steep discount. If there was a Haven closed-end fund, let’s imagine that shares trade $19.00. But, the NAV might be $20.00. The signals the fund trades at a 5% discount. Now, if the fund trades at $25.00 a NAV of $20, the fund trades at a 25% premium. We are looking for unique opportunities when the fund trades at a discount. 

Here’s the Fund to Own to Invest like Warren Buffet

Take a look at the Boulder Growth & Income Fund (NYSE:BIF). This is a fund that largely replicates Buffett’s portfolio. The fund owns $437.44 million in BRK Class A stock and another $159.90 million in BRK.B stock. 

The fund also owns stakes in Cisco Systems (NASDAQ:CSCO), JPMorgan Chase (NYSE:JPM), Pfizer (NYSE:PFE) and Yum! Brands (NYSE:YUM). These are all stocks owned by Buffett’s firm. Today, the stock trades at $14.05, while the NAV sits at $16.45. 

Invest Like Warren Buffett

That’s roughly a 15% discount to the net asset value of the fund. Remember, I also noted that the fund pays a dividend of 2.9%. This is significant because Berkshire Hathaway famously does not pay a dividend. 

Combine the income potential of this fund with the upside created by the gap between the stock price and the stock’s underlying net asset value. This is definitely a long-term fund that you can own on the cheap and use dividend reinvestment to build wealth over time. We’ll discuss closed-end funds at greater length in the near future.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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