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ETF Strategies Based on Billionaires' Choices

Sanghamitra Saha
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Everybody dreams of becoming rich and famous like Warren Buffett, Carl Icahn, Daniel Loeb, David Tepper or David Einhorn. After all, these ambitious and veteran investors have proven how profitable putting one’s money in the right place can be.

Buffett’s Berkshire Hathaway has added more than 105% over the last five years compared with 82% returns offered by the S&P 500. Investors should also note that Dan Loeb, the head of the hedge fund Third Point LLC, saw his company growing 5.45% in the last-concluding quarter, despite the general hedge fund industry downturn.

Against this scenario, we highlight a few stock and ETF options that could help you to match the investing style of these iconic billionaire investors (read: Beat the Market with These Guru ETFs).

Be Big on Bank of America

Warren Buffett's Berkshire Hathaway did not purchase new common shares of Bank of America BAC. However, conversion of preferred shares bought following the U.S. housing crisis was noticed, which led to $17.2 billion at the end of the third quarter.

Buffett’s interest in Bank of America puts BAC-heavy ETFs like iShares U.S. Financial Services ETF IYG and PowerShares KBW Bank Portfolio KBWB in focus. Berkshire’s another favorite, Synchrony Financial SYF makes a case for investing in ETFs like Guggenheim Clear Spin-Off ETF CSD.

Buffet Loves Apple

Buffett is outright bullish on Apple AAPL. Berkshire first tapped Apple shares in 2016, garnered about 130.2 million shares of the tech giant as of Jun 30, 2017, and raised its stake in the iPhone maker by another 3.9 million shares, taking the exposure to 134 million shares in the quarter (read: ETF Investing Lessons from Warren Buffett).

Buffett Hates IBM

Buffett is now leaving his one-time favorite International Business Machines Corporation IBM shares behind. Berkshire possessed about 81 million shares of IBM at the end of 2016 but cut down its position to about 54 million shares in the first and second quarters of 2017.

Berkshire further lowered its exposure by about a third to 37 million shares as of Sep 30. So, investors following Buffett may opt to stay away from the likes of First Trust NASDAQ Technology Dividend Index Fund TDIV as the fund has about 7.7% weight in IBM. But the fund's fourth holding is Apple (7.8%), which is a positive.

Loeb Bullish on Alibaba, Baxter International and DowDuPont

Third Point raised its stake in Chinese Internet giant Alibaba Group Holding Ltd. BABA by about 50% in Q3, resulting in a $1.1 billion-position at the end of Q3. The Chinese e-commerce giant has heavy exposure in BLDRS Emerging Markets 50 ADR Index Fund ADRE and Guggenheim China Technology ETFCQQQ (read: 5 ETFs to Ride on Alibaba's Solid Earnings & Outlook).

Apart from Alibaba, Third Point LLC focuses on healthcare company Baxter International BAX (which is heavy on iShares U.S. Medical Devices ETF IHI) andchemical giant DowDuPont DWDP. A focus on DowDuPont gives ways to investing in iShares U.S. Basic Materials ETF IYM andMaterials Select Sector SPDR ETF XLB.The hedge fund is also big on BlackRock (BLK) and Facebook (FB).

Loeb Dumps Google

Third Point lowered its stake in Alphabet GOOGL. If investors want to follow this strategy, they can have a cautious approach toward the likes of iShares U.S. Technology ETF IYW and Technology Select Sector SPDR Fund XLK.

Following Icahn

Carl Icahn's Icahn Capital’s 13F filing says he is retreating from American International Group AIG, though the company still holds the second position of his portfolio. If you share the same view, you may be skeptical about iShares U.S. Insurance ETF IAK. The fund puts about 7.6% in AIG.

Generalized ETF Bets

This is not the end though, as yet another easy way to follow billionaires’ ideas is by investing in Direxion iBillionaire Index ETF IBLN. The fund tracks the iBillionaire Index to provide exposure to 30 large-cap U.S. equities having the highest allocation in the investment portfolio of billionaires.

Investors can also have a look at Goldman Sachs Hedge Industry VIP ETF GVIP. The fundconsists of fundamentally driven hedge fund managers’ “Very-Important-Positions,” which appear most frequently among their top 10 long equity holdings.

Yet another fund Global X Guru Index ETFGURU seeks to generate alpha over the broad market by investing in highest conviction ideas from a select pool of hedge funds.

There is another fund Validea Market Legends ETF VALX, which is actively-managed and selects the highest-scoring stocks using a series of systematic, fundamentally oriented investing models based on the strategies of Wall Street legends.

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International Business Machines Corporation (IBM) : Free Stock Analysis Report
 
Bank of America Corporation (BAC) : Free Stock Analysis Report
 
Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
SPDR-TECH SELS (XLK): ETF Research Reports
 
GUGG-CHINA TEC (CQQQ): ETF Research Reports
 
SPDR-MATLS SELS (XLB): ETF Research Reports
 
ISHARS-US FN SV (IYG): ETF Research Reports
 
ISHARS-US INSUR (IAK): ETF Research Reports
 
VALID-MKT LGND (VALX): ETF Research Reports
 
FT-NDQ TECH DIF (TDIV): ETF Research Reports
 
ISHARS-US MED D (IHI): ETF Research Reports
 
PWRSH-KBW BP (KBWB): ETF Research Reports
 
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