The Warren Buffett Wannabe Index

November 25, 2013, 5:04 P.M. ET

The Warren Buffett Wannabe Index

By Robert Milburn

Want to invest like Warren Buffett? That’s the premise of a recently launched new app, callediBillionaire, which allows you to dig through the holdings of the nation’s top financial gurus and create your own portfolio based on where the smart money has parked cash. These guys (no females on the list yet) include Warren Buffett, Carl Icahn, and David Einhorn, investors famous for beating the broader market. So you can understand the logic of this investment gimmick, but when we tested the app, we found it had a few bugs still to work out.iBillionaire tracks the performance of 21 different Wall Street billionaires who made their money in the financial industry. “Finance has become very complex,” says Raul Moreno, co-founder of iBillionaire, “and 90% of what these billionaires are doing is very basic and disclosed. So why not copy them?”

The idea is simple enough – troll through the copious stacks of SEC filings where Wall Street’s best minds are forced to disclose their holdings, and aggregate the data into a usable format for investors to fiddle with, based on interesting parameters. It’s important, though, to understand the difference between investors like Buffett making the initial move and retail investors coming in after that fact.

When Buffett buys a company’s stock it is out of favor and undervalued, but when you buy the stock – post the Buffett announcement and after getting prodded by this index— you are buying into a stock with a Buffett premium built into the price. That seriously reduces your chance of actually making money. Also understand how the different billionaire investors work. Buffett buys for the long-term, which arguably means you stand a better chance of making some money investing alongside him over the long term. Icahn’s method, on the other hand, is to muscle around corporate executives to get the company restructured; he then sells his stock fairly quickly and at a premium, after which the stock usually drops. When we pressed Moreno on this point, he claimed that his studies showed that even with a 30-day lag after the billionaire’s initial investment announcement, a retail investor following his index would still outperform the S&P 500, since most of these purchases play out over a long period of time.

With that caveat in mind, the app is fairly easy to use. Log-in to iBillionaire’s site, or connect via your tablet or smartphone, and you can select a famous investor from the list. Pick Warren Buffett, for example, and you’ll see 43 of Berkshire Hathaway’s publicly listed holdings and their aggregate performance versus the S&P over the past four years. For each company, you can see it as a percentage of the overall portfolio, Berkshire’s average cost basis, the current price and the gain or loss on the investment. Furthermore, a list of recent news queues at the bottom so you can see, for instance, that Buffett initiated a new position in Suncor Energy (ticker: SU) as of August 16, 2013.

The app can also send notifications to your phone that are triggered by events. These “push notifications” are sent in real-time when, say, a particular billionaire buys or sells a stock, if an individual security dips below a price level you’ve set, or should a stock trade below the billionaire’s purchase price. You can dictate which notifications you receive and set parameters for when they are triggered.

Before you’re tempted to fire your broker in favor of going-it-alone and tracking billionaires, it should be noted that iBillionaire’s best offering is a bit glitchy at the moment.

The app has the ability to generate a portfolio that mixes and matches between your favorite investors. Say you’d like a dash of Buffett, a splash of Ray Dalio and want to be long on Bill Ackman – iBillionaire can generate a tailored portfolio. First, you click-on the “Strategies” tab, blend each as a percentage of the overall portfolio, then watch as iBillionaire creates a mock portfolio based on your parameters.

All well and good, but when I did this, the portfolio never materialized as promised.

Moreno explains that since the app’s launch two weeks, iBillionaire has grown to 70,000 users and its rapid adoption was not anticipated by Moreno’s five-person team. “The ‘Strategy’ section is the feature that is currently under a lot of pressure on our servers,” Moreno says. At any given moment, he says, 2,000 investors have the same request; that, in turn, is putting stress on the application which loads 10 years of back data. “We are expanding our server capabilities everyday and we’ve hired a full-time employee to continue to monitor and improve performance.”

Though this is a confirmation of the app’s broader appeal, users will surely punish the company if it doesn’t get its act together. Moreno turned over his own account to Penta, an account that invested 50/50 in Icahn and Buffett, which seemed to work nicely.

The app is free to download but a premium subscription costs either 99 cents per month or $9.99 a year. This allows you to unlock access to real-time message alerts and create unlimited portfolios that blend the holdings of different billionaires.  On the ‘Strategies’ screen, for example, you can see the number of billionaires that hold a given stock. Visa (V), AIG (AIG), and Freeport-McMoRan Copper & Gold (FCX) have attracted the interest of seven billionaires, possibly an indication of their desirability; but do your own analysis. Take Visa, for instance. Almost all of the seven billionaire holders have been sellers recently, suggesting that the Visa investment play has perhaps run its course.

The app designer has also created the iBillionaire index, which is composed of the top 30 large-cap equities that are both listed in the S&P 500 and owned by the financial billionaires it tracks. According to iBillionaire, the index has outperformed the S&P 500 over one, three, and five year periods. Moreno claims he is in talks with potential partners to create an ETF out of the index.

We are continuously amazed by the ingenuity of Wall Street’s entrepreneurs, continuously able to repackage and resell ageless ideas in new ways – and make a killing in the process.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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