The proof of the pudding is in the eating, of course. Consider a December 2013 column I wrote, soon after the “Buffett’s Alpha” study began circulating widely in academic circles. In that column I mentioned a mutual fund that comes close to using the same formula that was derived by the study: the AQR Large-Cap Defensive Style Fund AUEIX, -0.16% Since that column appeared, the fund has produced almost the same return as Berkshire Hathaway, 13.7% annualized for the AQR fund, versus 13% for Berkshire Hathaway, according to FactSet.
An ETF that focuses on at least some of the same criteria as the researchers outline is the iShares Edge MSCI USA Quality Factor ETF QUAL, +0.11% Since the date of my December 2013 column, it has performed nearly as well as Berkshire Hathaway’s stock, producing an 11.9% annualized return.
Both the AQR fund and the ETF, as well as Berkshire Hathaway stock, beat the S&P 500’s SPX, -0.03% 11.8% total return over the comparable period.