Buffett’s Alpha. by Andrea Frazzini, David Kabiller, and Lasse Heje Pedersen
The authors find that Buffet has been picking low volatility, low beta stocks with consistent earnings, and then levering up his investment using his insurance float.
“Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management.”