The INEVITABLES  60-80% of the portfolio

Buffett likes to invest in what he calls "Inevitables". These businesses are unlikely to undergo significant changes in the long and will dominate for 10-20 years. The Buffetique Growth ETP Inevitables are investments that we believe will continue to offer exceptional long term investment gains due to their investment styles and the ethos of their investment managers.

The portfolio is as follows:

BERKSHIRE HATHAWAY (BRK2)

Buying shares in Berkshire Hathaway is the easiest way to invest like Warren Buffett. Berkshire Hathaway is a unique collection of wholly owned businesses and stock markets investments. In its annual report February 26th 2022 it was stated:

• “It owns and operates more U.S.-based “infrastructure” assets – classified on our balance sheet as property, plant and equipment – than are owned and operated by any other American corporation.
• Operations of its “Big Four” companies account for a very large chunk of Berkshire’s value: the insurance business, the company’s 5.55% stake in Apple Inc the railroad company BNSF whose trains travelled 143 million miles and carried 535 million tons of cargo in 2021, and Berkshire Hathaway Energy which is described as a leading force in wind, solar and transmission throughout much of the U.S.
• Leading non-controlling stakes in financial services companies such as a 19.9% stake in American Express, a 13.3% stake in Moody’s, a 12.8% stake in Bank of America and an 8.3% stake in BNY Mellon.
• Non-controlling stakes in leading companies outside of financial services and Apple include a 9.2% stake in Coca-Cola and a 7.7% stake in Chinese electric vehicle company BYD.”

With the high price of the underlying Berkshire Hathaway A & B shares we have chosen to invest in the LS shares x 2Berkshire Hathaway ETP. The Leverage Shares 2x Long Berkshire Hathaway (BRK-B) ETP Securities seeks to track the 2x Long Berkshire Hathaway Investment Strategy, which is designed to provide 2x the daily return of Berkshire Hathaway Inc. (Class B) stock, adjusted to reflect the fees and costs of maintaining a leveraged position in the stock. It invests directly in the underlying Berkshire Hathaway Inc. (Class B) stock and uses margin (borrowing) to purchase additional shares of Berkshire Hathaway Inc. (Class B) stock. For example, if Berkshire Hathaway Inc. (Class B) rises by 1% over a day, then the ETP will rise by 2%, excluding fees. However, if Berkshire Hathaway Inc. (Class B) falls by 1% over a day, then the ETP will fall by 2%, excluding fees.

Berkshire Hathaway will always be our largest holding with an approximate investment of 20% in BRK2 ETP.

FINSBURY GROWTH & INCOME TRUST (FGT)

Fund Manager Nick Train is one of the UK fund managers who are regularly referred to as Britain's answer to Warren Buffett. His portfolio consists of high quality, cash generative companies with strong franchises which he holds for the long term. The portfolio is highly concentrated with just over 20 holdings with approximately 80% invested in UK companies such as Diageo, Unilever, London Stock Exchange and Burberry. The overseas element includes global brands such as Heineken, Mondelez and Remy Cointreau.

SCOTTISH MORTGAGE TRUST (SMT)

Scottish Mortgage is the largest closed end fund in the world and a constituent of the FTSE100 index. Managers Tom Slater and Lawrence Burns employ a stock pickers approach and like Buffett they believe that outsize returns are generated by a small number of exceptional companies. They also believe as does Buffett that investors need to adopt the mindset of "owners of companies rather than renters of share prices'.

Scottish Mortgage has a global portfolio of outstanding companies and also offers exposure to private companies. The size and reputation of Scottish Mortgage means that it's able to access early stage investments that are not usually accessible to private investors.

CENTRAL SECURITIES CORPORATION (CET)

Central Securities strategy is simple: it aims to own bargain price companies that are growing. It provides exposure to great companies like Alphabet, Charles Schwab and Buffett favourite American Express. The fund has a long-term track record and has been performing year in year out for a long time. CET traces its roots all the way back to 1929 in fact the fund was founded on October 1st 1929 just twenty eight days before the Black Friday Crash that triggered the Great Depression so this fund is no flash in the pan – CET has weathered it all: wars, inflation, deflation you name it.

PERSHING SQUARE HOLDINGS (PSH)

London listed Pershing Square is the second largest closed end fund in the world after Scottish Mortgage and a constituent of the FTSE 100. The portfolio is managed by Bill Ackman and Pershing made its reputation as a hedge fund. However in recent years Ackmans investment persona has been transformed from Wall Street buccaneer to Warren Buffett. Pershings mission now is “to invest in the extremely durable growth companies that meet our core principles for business quality, simplicity, predictability and free cash flow generation”. Like Buffett owns a big stake in Berkshire Hathaway, Bill Ackman and his team own a big stake in PSH and as such Ackman and his teams interests are very much aligned with their shareholders.

SMALLER COMPANIES  20% of the portfolio

At the start of his investment career when Buffett was, as he put it, “killing the Dow” much of his success was finding undervalued smaller companies.

As Buffett became more successful and built up his fortune he was forced to leave investing in smaller companies behind as he stated in 1999 "If I was running $1 million today, or $10 million for that matter, I'd be fully invested... it’s a huge structural advantage not to have a lot of money...The universe I can’t play in has become more attractive than the universe I can play in. I have to look for elephants. It may be that the elephants are not as attractive as the mosquitoes. But that is the universe I must live in." Buffett was saying that he can’t buy small-cap stocks (the mosquitoes) because he had too much money to invest. He must "look for elephants".

We therefore feel it is essential that Buffettique Growth ETP has some exposure to the superior growth prospects of smaller companies.

SMITHSON INVESTMENT TRUST (SSON)

Smithson invests in a concentrated portfolio of high quality small and mid-cap stocks. Smithsons investment strategy closely follows Terry Smiths strategy with the Fundsmith Global equity strategy. Terry Smith is another UK manager who is referred to as the UK's answer to Warren Buffett. The huge size of Fundsmith meant that Smith faced the same problems that Buffett faced earlier in his career when small and mid-cap stocks were no longer accessible to the flagship strategy.

As a result in 2018 Smith launched Smithson to be managed by Simon Barnard and Will Morgan with a similar mantra to Fundsmith- Buy great companies, don't overpay and do nothing!

BLACKROCK SMALLER COMPANIES (BRSC)

Blackrock Smaller companies aims to identify high quality UK smaller companies that are cash generative have strong balance sheets and have competitive advantages. The trust has the ability in anything from AIM listed stocks with market capitalisations of below £150 million all the way up to mid-cap stocks with a £2 billion market capitalisation.

BRSC has a superb long-term track record and Manager Roland Arnold benefits from support of Blackrocks UK Emerging Companies team one of the best small cap teams in the UK.

WORKOUTS  20-30% of the portfolio

Buffett called them ‘Workouts’ – his mentor Benjamin Graham called them ‘Special Situations’. During the Buffett partnerships Buffett kept over 20% of his assets in Workouts and this part of his portfolio was completely different to the buy and hold part of the portfolio.

Arcanam Asset Management have developed a shorter term strategy that trades US Buffett type stocks. The strategy picks four stocks per month and is rebalanced on a monthly basis. This black box strategy utilises a number of shorter term indicators to pick the individual equities. The system can also utilise inverse exchange traded products to take advantage of market falls. At times the system could comprise both long and inverse positions. This means that the system has the ability to make money irrespective of market direction.