How UK investors could build a Warren Buffett portfolio
Last week, I took some time to take a closer look at Warren Buffett's current portfolio. I wanted to see exactly what the greatest investor of all time is currently invested in and how he allocates his capital.
Today, I'm taking the Buffett topic one step further. Here's a look at how UK investors could build a portfolio just like his, only with UK stocks.
One of the first things I noticed about his portfolio is that he owns several consumer staples stocks, including Kraft-Heinz, Johnson & Johnson and Procter & Gamble. These companies make essential products that consumers buy irrespective of the economic cycle. They also have extremely strong brand power. For example, Procter & Gamble owns well-known, trusted brands such as Oral-B, Gillette and Herbal Essences.
So, how can UK investors replicate an investment in this sector?
I'd suggest starting with Unilever. Given that Buffett tried to buy the company early last year through Kraft-Heinz, we know that Unilever is a classic Buffett-type stock. The FTSE 100 company has a world-class portfolio of brands such as Dove, Persil and Domestos and with strong emerging markets exposure, looks set for growth in the coming decades.
Other top options in this sector include alcoholic beverage manufacturer Diageo, health and hygiene champion Reckitt Benckiser and fruit juice specialist Britvic.
Next up, financials. Buffett has a sizeable weighting to this sector, owning a selection of banks and money managers, as well as payments companies.
Buffett owns both Wells Fargo and Bank of America, which are two of the US's 'big four' banks. If UK investors wanted similar UK exposure, they could take a look at HSBC Holdings and Lloyds Banking Group.
An alternative in the financial sector, which perhaps exhibits more Buffett qualities, is shares and funds specialist Hargreaves Lansdown. The company is a leader in its field, enjoying a high market share and strong client retention rate - exactly what Buffett looks for in a stock.
Two other alternatives in this sector include London Stock Exchange and Schroders, which are both owned by Britain's own Warren Buffett - fund manager Nick Train.
Technology is a theme that's harder to play for UK large-cap investors. While there are some really exciting smaller technology companies listed in the UK, we don't have stocks like Apple, Buffett's top holding.
One stock I do believe he would be interested in is UK property website Rightmove. The £4bn market-cap company is the dominant player in its field, with an 80% share of mobile market traffic, and generates a fantastic return on equity.
It's also worth noting that Buffett has exposure to several airline stocks at present, owning American Airlines, Delta and Southwest Airlines. UK investors could look at British Airways owner International Consolidated Airlines, or perhaps even budget specialist easyJet as UK alternatives.
Of course, this is just a handful of ideas that could help you build a Buffett-esque portfolio. If you aspire to build a portfolio like his, keep your investment ideas simple, stick to large-cap stocks and remember to diversify your capital across many different holdings.
Edward Sheldon owns shares in Unilever, Lloyds Banking Group, Schroders, and Diageo. The Motley Fool UK owns shares of and has recommended Apple, Britvic, and Unilever. The Motley Fool UK has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool UK has recommended Diageo, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, and Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.