These high-conviction wide-moat offerings will hold you in good stead through tough times.
Warren Buffett isn't fazed by an anemic market or a bleak economic outlook. He knows that successful investing means playing a good defense, but doing so doesn't have to equal passively waiting on the sidelines. When he finds companies with long-term competitive advantages and clean balance sheets, he'll back up the truck for them.
Investors who like the Buffett philosophy can, of course, invest in Berkshire Hathaway
Using Morningstar.com's Premium Fund Screener, we looked for funds with some Buffettlike characteristics. We starting by homing in on funds with stocks that have sustainable competitive advantages, looking for average moat ratings of moderately wide or higher. Buffett has dabbled in overseas investments, but we kept the focus on domestic no-load stock funds with expense ratios of no more than 1%. To seek out funds whose managers demonstrate conviction, we layered on additional screens for concentration, requiring that funds have no more than 40 holdings and at least 30% of their assets are in the manager's top 10 picks.
Few mutual funds have managers with Buffett's tenure--he's been running Berkshire full-time since 1969--but we looked for at least some longevity, seeking managers who have at least five years of experience at the helm. Finally, we called up distinct portfolios of noninstitutional funds that were open to new money with initial purchase requirements of less than $5,000. Below, we highlight two of the funds the screener yielded.
Bridgeway Blue Chip 35 Index
Lead manager John Montgomery and his team pave their own path with this unique index fund, owning about 35 of the market's heavyweights in equal weightings and rebalancing them quarterly. The portfolio's holdings include moat-worthy firms such as Oracle
Sticking to a highly disciplined strategy has been fundamental to this fund's success. Management screens through nearly 10,000 companies before homing in on around 30 firms that have earned a 15% return on equity--a measure of profitability--for 10 consecutive years, and are trading below what management considers to be their fair values. The fund's concentration and miniscule turnover of 12% attest to management's high-conviction strategy--an approach that has rewarded investors with a strong long-term track record and limited volatility in comparison with its large-growth peers. With a portfolio that includes 4- and 5-star moat-worthy stocks such as PepsiCo
Data as of April 25, 2011.