There’s a Robot Warren Buffett ETF
Also Steve Cohen stops trading, Ryan Cohen forgot to do HSR, FTX’s audit wasn’t great and don’t text about work.
What is Warren Buffett? Like, if you were trying to describe and recreate his essential features, how would you do it? I guess a decent answer is “he is fully described by his DNA, so I would simply get his DNA and clone him in a lab,” but that does not seem quite possible on current technology and anyway let’s try for something more parsimonious. We do not really need to capture his physical appearance and personal foibles and ineffable humanity; we are interested in Warren Buffett because he is good at investing, and we just want to capture that. What we want is some way to reduce the complex humanity of Warren Buffett to some reproducible formula that picks stocks the way he picks stocks.
A lot of research in finance aims to answer questions like this, how to measure and describe someone’s investing approach. There’s a kind of famous paper from Andrea Frazzini, David Kabiller and Lasse Pedersen at AQR, titled “Buffett’s Alpha,” that “decompos[es] Buffett’s performance into its components due to leverage, shares in publicly traded equity, and wholly owned companies,” “reveals that Berkshire Hathaway loads significantly on the BAB and QMJ factors,”1 and finds that “these factors almost completely explain the performance of Buffett’s public portfolio.” Warren Buffett can be reduced to a set of coefficients on various common investing factors, plus a smallish residue of ineffable humanity.2