On May 6, 2023, Warren Buffett and Charlie Munger will host Berkshire Hathaway’s BRK.B annual shareholder meeting in Omaha, Nebraska. Tens of thousands of people will attend the meeting in person, and many more will watch the livestream from CNBC. Given that Buffett is one of the most successful investors in history, many of the people watching him will be professional investors, including some of the many mutual fund managers who are fans of the Oracle of Omaha.
For the 14th consecutive year, we’re marking the Berkshire meeting by looking at “Funds That Buy Like Buffett”—mutual funds with the highest percentage of stocks in common with Berkshire’s investment portfolio, as listed in Buffett’s annual letter to shareholders and in Berkshire’s annual report. (You can find last year’s “Funds That Buy Like Buffett” here, with links to previous articles.)
In previous years, Buffett’s shareholder letter has listed Berkshire’s 15 largest stock holdings by market value, but this year it listed the eight stocks in which Berkshire was the largest shareholder as of Dec. 31, 2022: American Express AXP, Bank of America BAC, Chevron CVX, Coca-Cola KO, HP HPQ, Moody’s MCO, Occidental Petroleum OXY, and Paramount Global PARA. The annual report also listed Berkshire’s five largest stock holdings at year-end; the top spot is held by Apple AAPL, as it was last year, and the rest of the top five are in the above list (American Express, Bank of America, Coke, and Chevron).
The table below shows the open-end mutual funds with the largest combined weightings in those nine “Buffett stocks” as of their most recent portfolios. We left out funds without at least $1 billion in assets or a five-year track record; those not covered by Morningstar analysts; and sector funds such as technology and financial-services funds. With those constraints, the following table shows the 10 funds with the most Buffett-like taste in stocks. We show each fund’s Morningstar Category, size, and percentile rank in its category for the year to date and for the trailing five years (through April 20, 2023). Each of these funds has beaten its category median over the past five years, illustrating the value of holding the type of high-quality growth stocks that Buffett favors.
The top two funds on the list, American Century Select TWCIX and American Century Ultra TWCUX, occupied the same spots last year. They are both run by veteran portfolio managers Keith Lee and Michael Li, whose Buffett-like approach to picking growth stocks focuses on companies with histories of high profits and competitive advantages to help them maintain those profits over time. These funds’ presence atop this list is due to one stock: Apple, a Buffett favorite that is far and away the largest holding in both of these funds, taking up around 15% of each portfolio’s stock holdings. Both funds have put up pretty good performance numbers in recent years, though each only earns a Morningstar Analyst Rating of Neutral for the investor shares because of portfolio constraints that make it hard to stand out in the crowded large-growth space.
The third fund on the list, the $22 billion Fidelity OTC FOCPX, also made the top 10 last year. The manager is Chris Lin, a Fidelity veteran who used to run technology sector funds, so it’s no surprise that tech has a heavy presence here. Lin’s approach to finding growth stocks is Buffett-like only in the very broadest sense, as it’s focused on finding competitively advantaged firms that have pricing power but don’t require a lot of capital investment. However, he does share one characteristic with Buffett and many of the other managers on this list: He’s a big fan of Apple, which took up nearly 13% of the Feb. 28, 2023, portfolio. The prominence of Apple among this year’s “Buffett stocks” is a stark illustration of how much that company and other tech giants like Microsoft MSFT and Amazon.com AMZN (Lin’s second- and third-largest holdings) now influence the U.S. stock market and market indexes.
The other fund that’s a holdover from last year’s list is BNY Mellon Appreciation DGAGX, formerly known as Dreyfus Appreciation. It’s run by a team at subadvisor Fayez Sarofim that also manages another fund in this year’s top 10, BNY Mellon Worldwide Growth PGROX, a global version of the same strategy. Like Buffett, the Fayez Sarofim team looks for dominant companies in attractive industries, preferably with low debt and high returns on capital. The managers’ patient, long-term approach has led to some lean years in the past, but both funds have easily beaten their peer groups over the past five years. As of March 31, 2023, most of these funds’ weighting in “Buffett stocks” came from Apple and Chevron, which were among the top six holdings in both funds, though each also had a smaller position in Coca-Cola.
Finally, the largest fund on this year’s list is Fidelity Growth Company FDGRX, which has more than $40 billion in assets, with the strategy having more than $100 billion. Manager Steve Wymer has led the fund to exceptional results over the past 25 years with an aggressive growth strategy. He often likes to own smaller, lesser-known growth stocks, but because of the fund’s size a substantial part of the portfolio has long been in mega-cap growth names. The top holding as of Feb. 28, 2023, was Buffett favorite Apple, at almost 12% of assets, and Wymer also had a smaller position in Coca-Cola.
Morningstar senior analyst Jack Shannon contributed to this report.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.