5 Cheap Buffett Stocks: Are They Right for Your Portfolio?

by: MyPlanIQ
Life moves quickly. Already this year we have seen uprisings, natural and man-made disasters, tax season has come and gone, while the Royal Wedding was still fresh in our minds until the death of Osama bin Laden stole the headlines. How many of our New Year's resolutions are still intact? The tyranny of the urgent may tempt us to delay and time zips by.
The problem is that we can easily be overwhelmed and shot down. The way to solve this is to focus on what works in the long term, allowing us to filter out what may work in the short term but won't stand the test of time.

We continue to examine different portfolios to see what we can learn and use to further our investment portfolios.

Matt Koppenheffer of the Motley Fool selected five cheap Buffet stocks. A "Buffett stock" is one that has a high Buffett ratio, a low valuation, and a business that is relatively predictable.
His five choices were:



Buffett Ratio

Forward Price-to-Earnings Ratio

Autoliv (NYSE: ALV) Safety products for autos 34% 10.6
Telefonica (NYSE: TEF) Telecommunications 31% 9.6
Teva Pharmaceutical (Nasdaq: TEVA) Generic drug manufacturer 49% 9.8
Whirlpool (NYSE: WHR) Home appliances 32% 7.8
Newell Rubbermaid (NYSE: NWL) Branded home and office goods 81% 11.3

We entered these funds into our system and then compared it with a balanced portfolio of Dividend producing ETFs.


Fund in this portfolio

Original Fund Description



REAL ESTATE ICF (iShares Cohen & Steers Realty Majors) iShares Cohen & Steers Realty Majors 70.77 13.34%
FIXED INCOME TIP (iShares Barclays TIPS Bond) iShares Barclays TIPS Bond 110.77 19.73%
Emerging Market VWO (Vanguard Emerging Markets Stock ETF) Vanguard Emerging Markets Stock ETF 49.05 13.23%
US EQUITY DVY (iShares Dow Jones Select Dividend Index) iShares Dow Jones Select Dividend Index 51.72 4.16%
US EQUITY VIG (Vanguard Dividend Appreciation ETF) Vanguard Dividend Appreciation ETF 55.41 3.14%
INTERNATIONAL EQUITY IDV (iShares Dow Jones Intl Select Div Idx) iShares Dow Jones Intl Select Div Idx 36.05 17.27%
High Yield Bond HYG (iShares iBoxx $ High Yield Corporate Bd) iShares iBoxx $ High Yield Corporate Bd 91.84 16.51%
INTERNATIONAL BONDS EMB (iShares JPMorgan USD Emerg Markets Bond) iShares JPMorgan USD Emerg Markets Bond 106.41 12.55%

Portfolio Performance Comparison

Portfolio/Fund Name

1Yr AR

1Yr Sharpe

3Yr AR

3Yr Sharpe

5Yr AR

5Yr Sharpe

Retirement Income ETFs Strategic Asset Allocation Moderate 13% 108% 3% 19% 5% 24%
Retirement Income ETFs Tactical Asset Allocation Moderate 7% 54% 10% 84% 10% 69%
P The Fools 5 Cheap Buffett Stocks 6% 23% 5% 15% 5% 16%
Full Comparison

Three Month Chart

One Year Chart

Three Year Chart

Five Year Chart

These stocks may be cheap but they aren't a good value.

We will keep looking to see if there are better choices of stocks that offer better risk adjusted returns.

Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.