ETF Plays To Invest Like Buffett, Fisher, Paulson

by on July 14, 2010 | ETFs Mentioned:

Taking a quick look around the investing landscape, one might not immediately suspect that we’ve entered the dog days of summer; there is no shortage of bears who have seemingly come out of hibernation. But not everyone is down on the economic outlook with bulls making a case for a strong second half of 2010. In a recent piece for the Wall Street Journal, James Altucher notes that some legends of investing are haven’t fled for safety just yet, instead making some sizable bets on a recovery. Most investors lack the capital to launch a buyout of one of the world’s largest railroads, but that doesn’t necessarily preclude them from following in the footsteps of Warren Buffett. Below, we highlight some of the favorite plays of Buffett, Ken Fisher, and John Paulson, as well as some ETF ideas for investors looking to play along with the big dogs [for more ETF ideas, sign up for our free ETF newsletter].

Warren Buffett

The “Oracle of Omaha” is one of the most successful and best-known investors of all time; money managers around the world hang on his every word . Following the ideologies of Benjamin Graham and Phil Fisher, Buffett has turned himself into a multi-billionaire with a string of winning bets that have helped his portfolio to consistently defy gravity. Over the past year, Buffett has spent $30 billion on the railroad industry through a takeover of Burlington Northern, and has also bought 2.5 million shares of waste management firm Republic Services. “The interesting thing about garbage is that it’s directly correlated to the economy,” writes Altucher. “Garbage goes up when we consume more.”

For investors looking to replicate Buffett’s bullish outlook on these industries, there are a couple of interesting ETF options:

  • Market Vectors Environment Index ETF Fund (EVX): This fund tracks the NYSE Arca Environmental Services Index, a benchmark that provides exposure to publicly traded companies that engage in business activities that may benefit from the global increase in demand for consumer waste disposal, removal and storage of industrial by-products, and the management of associated resources. Republic Services comes in as the second highest holding with a 10.2% weight in the fund. As an ETF that tracks the waste management industry, EVX seems to be aligned with Buffett’s outlook.
  • iShares Dow Jones Transportation Average Index Fund (IYT): This ETF follows the Dow Jones Transportation Average Index, a benchmark that measures the performance of the transportation sector of the U.S. equity market. Among IYT’s holdings are several firms that operate in the same space as Burlington Northern; Union Pacific, Norfolk Southern, and CSX all receive big weightings. This ETF isn’t a pure play on the rail industry–trucking firms and shipping companies also receive big weightings–but it’s the closest thing out there [see more at Who Else Wants A Railroad ETF?].

Ken Fisher

Fisher’s claim to fame comes from not only his superior investing abilities, but from his heritage as well; his father was Phil Fisher, a major influence on Buffett. The younger Fisher is the CEO of Fisher Investments, and Investment Advisor magazine put him on the list of the 30 most influential people in the investment advisory business for the last three decades. “Fisher has recently been bullish on innovative ways to extract more gas and coal out of the ground,” writes Altucher. “In particular, he’s been bullish on Carbo Ceramics (CRR), Halliburton (HAL), and Baker Hughes (BHI).”

The energy industry has been in focus quite a bit this year, and there are no shortage of options for exposure through ETFs [see all options in the Energy Equities ETFdb Category]. There are also several funds focusing on companies that provide services to the industry, including one profiled below:

  • Oil Services HOLDRS (OIH): This fund has a major holding in Halliburton (11%), as well as big weightings in other firms that provide services to the oil industry; Baker Hughes, Schlumberger, and Transocean account for another 25% of assets [see Are Energy ETFs Now A Buy?].

John Paulson

Founder and president of Paulson & Co, John Paulson became famous when he invested $12.5 billion against the housing market in mid 2007, which yielded him a handsome $36 billion dollars by late 2008. Paulson is known to be a gold bug, but it appears that his economic outlook is improving; recent 13F filings show he bought 40 million shares of MGM Mirage. “Usually someone doesn’t buy shares of a casino if they think the economy is going down,” notes Altucher [also see Beyond XLY: Three Pure Play Consumer Discretionary ETFs].

For investors who want to bet on the casino industry along with Paulson, there’s an interesting ETF option from Van Eck:

  • Market Vectors Gaming ETF (BJK): This ETF measures the S-Network Global Gaming Index, a benchmark that includes publicly traded companies worldwide that derive greater than 50% of revenues from the global gaming industry. Though MGM Mirage only makes up only about 3% of this fund, BJK is full of stocks that should rise if the gambling industry gets a boost [see Gaming ETF (BJK) On A Hot Streak ]. Only about 35% of BJK’s assets are in the U.S.; the rest are spread across Australia (13%), Malaysia (11%), and the UK (11%), among others.

Disclosure: No positions at time of writing.