Legions of inves-tors worship Berkshire Hath-away Inc.’s Warren Buffett, and more than a few mutual funds have tried to lay claim to his storied investment approach. As well, organizations such as the American Association of Individual Investors have developed screens designed to find companies that Buffett would buy based on criteria he has promoted over decades of public speaking and in many annual reports.

What many investors may not realize is they can simply track the stocks comprising Buffett’s equities portfolio on the U.S. Securities and Exchange Commission’s Web site, www.sec.gov — for free. Every U.S.-based manager with more than US$100 million in assets must file documents within 45 days of the last day of each quarter detailing his or her portfolio.

Is this information worthwhile? Mebane Faber, a portfolio manager at Cambria Investment Management in Los Angeles, thinks so. He set out to examine if a simple, passive approach to tracking Buffett’s holdings via these filings could result in strong portfolio performance.

In his test, he simply took a list of all of Buffett’s holdings and weighted them equally. The result was strong outperformance relative to the overall market, with no down years since 2000. In fact, thanks to timing, Faber’s clone portfolio was able to produce an average annual return of 14.3%, besting Berkshire Hathaway’s actual performance of 10.6%. Faber didn’t factor in trading costs, however.

Because of lags between a fund manager making a buy or sell decision and when investors actually learn of it, the pre-expense return on such a copycat portfolio will probably fall a bit short of the pre-expense return on the fund being mimicked.

But, according to a study by James Poterba, an economics professor at the Massachusetts Institute of Technology, and the University of Chicago’s Mary Myers, investors may do even better after costs, particularly if they can cut their taxes by holding winners longer or by selectively selling losing positions.

The study also suggests funds with more assets invested in identifiable securities are easier to track, and those that turn over their portfolios frequently are more elusive.

The difference in pre-expense returns between copycats and actively managed funds declined with the percentage of fund assets that could be identified by the University of Chicago’s Center for Research in Security Prices, the researchers found. In short, the better known the assets are, the less difference between a fund’s returns and those of its clone.

LOW TURNOVER HELPS

Value managers such as Buffett are ideal subjects to copy, thanks to their low turnover, Faber says. Typically, they have longer holding periods, meaning the 45-day delay in reporting times should not be a major factor in performance. As well, value managers are more interested in the identification of target companies than in investment timing, he believes.

The stocks value managers lose confidence in are often of greater interest. This past quarter, Buffett sold his stakes in Target Corp., Sealed Air Corp. and OSI Restaurant Partners Inc., the parent company of the Outback Steakhouse chain.

There are other successful managers, of course, besides Buffett. Investors looking for inspiration can track what other “gurus” are doing by visiting Gurufocus (www.gurufocus.com). The site lets you take a look at what, say, Charles Brandes, founder of Brandes Investment Partners LP of San Diego, has been buying, what he paid and how many shares he holds.

Validea (www.validea.com) tracks managers’ approaches. It picks stocks by emulating the published strategies of market mavens. For instance, investors can screen for stocks Validea thinks value investor David Dreman might pick. Of course, it is all Validea’s interpretation. The real managers aren’t involved and may not agree with its conclusions.

Trolling these sites is like watching poker on television; you can see what cards the top players are holding and how much they’re risking.

The danger is these sites quickly go out of date, so making decisions based purely on what is posted is folly. But curious advisors and their clients can use this information to shape their own buys and sells. IE