Can we get a higher

return than Warren Buffett?

Group 3:Linke Jia

Haomin HeShimin Zhang

MacKenzie HansonAdriana Martinez-

Sanchez

Warren Buffett● The chairman, CEO and largest shareholder of

Berkshire Hathaway● Berkshire Hathaway is the most expensive stock, the

price per share is more than $200,000● The compound yield was nearly 20% over the past

50 years

Why?● Investing in stocks is always risky● We want to know how many shares of stocks to

purchase ● Know the returns and risks before buying stocks is

necessary● Maximize returns and lower risks● Can we beat Warren Buffett and the market?● Get some insights and learn from it

How?Creating 5 different portfolios by choosing what did Warren Buffett pick for each day and compare with the return using:● The weights of our solver● Warren’s weights● S&P 500Evaluating which method gives maximum return and lowest risk

Source of Data

1.GuruFocus

a. Look at Warren Buffett’s stock picks

b. Choose different dates

c. Eliminate some stocks

d. Starting point

2.Yahoo Finance

a. Find each stock's historical weekly closing prices

b. Calculate returns

c. Look up historical S&P 500 values for same range

Mechanism & StepsStep 1 : Get Warren portfolio’s total return --Select a transaction record of one day--Pick out all the stocks that Warren bought or added at that day--Recalculate the weights of Warren’s portfolio on that day--Calculate each stock’s return after one year one by one--Get Warren portfolio’s total return after one year using his portfolio

on 6/30/2013

Step 2: Get our portfolio’s total return

--Getting our portfolio’s weights from solver

--raw data: weekly price history one year ago (6/30/2012-6/30/2013) --implement the “optimal” method we learned in class --constraints: each stock’s weight should >=0 sum of all stock’s weight =1 expected stock return (unknown)>=average historical return of all stocks constraint specially for “mmult” function we used

--Multiply our weights of each stock with each stock’s return after one year, and sum them up to get our total return

Mechanism & Steps

Mechanism & Steps

return history 6/30/2012-6/30/2013

on 6/30/2013

Which is the highest?

Step 3: Compare Return of Warren’s portfolio

Return of our portfolio S&P 500

Warren Buffett’s Picks for 9/30/2012

Deere & Co (DE)DaVita HealthCare Partners Inc (DVA)General Motors Co (GM)International Business Machines

(IBM)Media General Inc (MEG)National Oilwell Varco Inc (NOV)Precision Castparts Corp (PCP)

Returns 0n 9/30/2013and minimized risk

● Return using Warren’s weights 17.13%

● Return using our solver weights 9.87%

● Return from the S&P 500 16.72%

● Minimized Risk using solver weights 0.00052810

Archer Daniels Midland (ADM)DaVita HealthCare Partners Inc

(DVA)General Motors Company (GM)International Business Machines

(IBM)National Oilwell Varco, Inc (NOV)Precision Castparts Corp. (PCP)VeriSign, Inc. (VRSN)WABCO Holdings Inc. (WBC)Wells Fargo & Company (WFC)Chicago Bridge & Iron Company

(CBI)

Warren Buffett’s Picks for 12/31/2012

Returns on 12/31/2013

and minimized risk● Return using Warren’s weights

41.53%

● Return using our solver weights 27.42%

● Return from the S&P 500 29.60%

● Minimized Risk using solver weights 0.000109362

Warren Buffett’s Picks for 7/1/2013

Returns on 7/1/2014and minimized risk

● Return using Warren’s weights 26.99%

● Return using our solver weights 28.72%

● Return from the S&P 500 22.19%

● Minimized Risk using solver weights 0.00015184

Wells Fargo & Company (WFC)Chicago Bridge & Iron Company (CBI)The Bank of New York Mellon Corp.

(BK)VeriSign, Inc. (VRSN)National Oilwell Varco, Inc. (NOV)Dish Network Corp. (DISH)U.S. Bancorp (USB)Suncor Energy Inc. (SU)General Motors Company (GM)

●Charter Communications Inc (CHTR)

●International Business Machines (IBM)

●Verizon Communications Inc (VZ)●Suncor Energy Inc (SU)●USG Corp (USG)●Liberty Global PLC (LBTYA)●Chicago Bridge & Iron Co (CBI)●Visa Inc (V)

Warren Buffett’s Picks for 06/30/2014

Returns on 06/30/2015

and minimized risk● Return using Warren’s weights -

2.69%

● Return using our solver weights 4.27%

● Return from the S&P 500 5.25%

● Minimized Risk using solver weights 0.000265566

Warren Buffett’s Picks for 12/31/2013

Corporation (USG)Liberty Global plc (LBTYA)The Goldman Sachs Group, Inc.(GS)Aberdeen Greater China Fund

(GCH)General Electric Company (GE)DaVita HealthCare Partners Inc.

(DVA)

Returns on 12/31/2014

and minimized risk● Return using Warren’s weights

14.69%

● Return using our solver weights 12.03%

● Return from the S&P 500 11.39%

● Minimized Risk using solver weights 0.00025989

●Assumptions and limitations ●Small sample data set ●Accurate data●Update our stock weight

calculations●Study Warren Buffett’s best

practices●Avoid his mistakes●Improvements: diversify

purchased stocks and broaden the research data set

“Someone is sitting in the shade today because someone planted a tree a long time ago”

-Warren Buffett

Final Thoughts