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Funds That Buy Like Buffett, 2017

These funds follow the Oracle of Omaha in buying and holding quality businesses.

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On Saturday, May 6, thousands of people will gather in Omaha, Nebraska for the annual  Berkshire Hathaway (BRK.B) shareholder meeting, led by Berkshire chairman Warren Buffett and vice chairman Charlie Munger. (The meeting will also be livestreamed at https://finance.yahoo.com/brklivestream, as it was last year.) That means it's time for our annual look at the mutual funds with the biggest stakes in the stocks held in Berkshire Hathaway's investment portfolio, as listed in Buffett's annual letter to shareholders. You can read this year's letter here, or as part of Berkshire's annual report, here.

As usual, this year's letter includes Buffett's explanations and opinions on a variety of topics, in addition to the financial results. Buffett explains why he doesn't "adjust" Berkshire's earnings like so many Wall Street-focused public companies do, and why Berkshire's market value has diverged so dramatically from its book value during the past 20 years, as the company's profits have increasingly come from operating businesses rather than investable securities. He discusses in some detail why he likes those businesses, which include three major insurers (Berkshire Hathaway Reinsurance Group, General Re, and GEICO), a railroad (Burlington Northern Santa Fe), a utility business (Berkshire Hathaway Energy), and dozens of smaller manufacturing, service, and retail businesses. Buffett discusses a wager he made nine years ago with investment manager Ted Seides: Seides bet that he could choose five funds of hedge funds that would collectively outperform an S&P 500 fund in a 10-year period, and Buffett bet that the index fund would beat the hedge funds. (Spoiler alert: with one year left in the bet, the S&P 500 fund is far ahead.)

David Kathman does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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