2 ETFs to Gain Exposure to Buffett

Here are two ETFs that offer different strategies to track Buffett's investments.
By Don Dion ,

NEW YORK (TheStreet) - Throughout his illustrious multi-decade career, fans, analysts and market commentators have attempted to gain insight into Warren Buffett's mind in hopes of mastering his investing strategies.

Although there are no specific Warren Buffett ETFs available, there are ways retail investors can use ETFs to add a dose of the Oracle's wisdom to their portfolio.

They can gain either direct exposure to him through a fund which boasts respectable exposure to his investing empire,

Berkshire Hathaway

(BRK.A) - Get Report

, or they can follow the Oracle's lead with products which utilize some of the same techniques he has used in the construction of his own legendary investment portfolio.

Option 1: Direct Buffett Exposure

One way to access Buffett through ETFs is to look for products which list Berkshire Hathaway as an underlying constituent.

In early 2010, in order to fund his headline-grabbing bid to purchase the remaining shares of Burlington Northern Santa Fe Railroad, Warren Buffett received shareholder approval for a 50-for-1 split for his

Berkshire Hathaway Class B Shares

(BRK.B) - Get Report

.

This move drastically reduced the per share price of the baby Berkshires, making it easier for retail investors to gain access to Buffett's firm. The value of a BRK.B share was $81.28 at the close of trading on Thursday.

Itching for a chance to gain direct access to the financier's mind, investors poured into these dramatically less expensive shares. On the first day of trading post-share split BRK.B's volume broke 14 million, a dramatic spike from 250,000 the previous day.

As a result of the massive uptick in volume, BRK.B was able to meet the

S&P 500

's regulatory requirements and was approved to join the index.

Since becoming an official constituent of the S&P 500, BRK.B has been included within the indices of a collection of passively managed exchange traded funds.

The product with the heaviest Berkshire Hathaway exposure is the

Financial Select Sector SPDR

(XLF) - Get Report

. BRK.B is listed as the XLF's third largest holding, representing over 8% of its portfolio.

Additionally, Buffett holdings

Wells Fargo

(WFC) - Get Report

,

Goldman Sachs

(GS) - Get Report

, and

American Express

(AXP) - Get Report

can also be found listed among the fund's top ten positions.

Option 2: Mimic Buffett's Strategy

A fund like XLF is appropriate for ETF investors looking specifically for an opportunity to add Berkshire Hathaway exposure to their portfolios.

However, the fund's top heavy and sector specific nature may be a concern for some. Therefore, avid fans of Buffett may find a more diversified product which utilizes some of the same techniques as the financier more to their liking.

In this case,

iShares Dow Jones Dividend Select Index Fund

(DVY) - Get Report

may be a more appropriate option.

Although it does not have any direct exposure to Berkshire Hathaway, the index underlying DVY does have a number of characteristics similar to the Oracle of Omaha's portfolio.

Like Berkshire Hathaway, DVY is designed for long term buy-and-hold approach to investing. The fund is comprised of a collection of stable medium and large dividend- paying companies in a wide range of market sectors. Top holdings include

Lorrilard

(LO)

,

Centurylink

(CTL) - Get Report

,

Eaton Corp

(ETN) - Get Report

,

PPG Industries

(PPG) - Get Report

,

Chevron

(CVX) - Get Report

and

McDonalds

(MCD) - Get Report

.

Throughout the economic turmoil which has raged throughout 2010, DVY has consistently proved itself to be a source of stability and has managed to outperform BRK.B over the past 90 days.

As we head into the future, there is no doubt that Warren Buffett will continue to make headlines and draw attention from the investing world. XLF and DVY are two examples of unique ways retail investors can follow the wisdom of this world famous investor.

Written by Don Dion in Williamstown, Mass.

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At the time of publication, Dion Money Management owned iShares Dow Jones Dividend Select Index Fund.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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