The numbers speak for themselves: Keeping an eye on the holdings of Warren Buffett is a good idea.

Although the name Berkshire Hathaway is not synonymous with its chairman and CEO, Warren E. Buffett--the greatest investor of all time--it definitely should be. Despite Berkshire’s origins in the textile industry it was not until 1964, when Buffett stepped into the driver’s seat of this holding company, that Berkshire really started to post astonishing gains year in and year out.

Buffett’s investing ideals are by no means original. He is the prodigy student of Ben Graham, the father of value investing, but Buffett's educational influences did not stop there. He combined what Graham taught with the investment principles of Philip Fisher. Fisher focused on what a company did and how it made money, stressing the qualitative fundamental characteristics of companies. By combining the teachings of both Graham and Fisher, Buffett, through his Berkshire investing vehicle, has been able to post unfathomable annual returns.

In adhering to the principles of value investing, Buffett is the personification of patience and discipline, two characteristics often in short supply in money managers. His buy-and-hold strategy had proven extremely profitable over the last 40 years. Berkshire’s so-called “bread and butter” is the insurance business, and amongst other insurance companies, Berkshire wholly owns the GEICO Corporation. The reveune from this stream of business was over $1.5 billion in 2004. But do not let this mislead you; Buffet shows little hesitation to invest in other sectors of the economy, as long as he feels he is getting a good deal. View Buffett's holdings now - click here.

Some of the most important factors value investors analyze are such things as ROE, debt-to-equity and price-to-book ratios, all in an effort to determine a company’s intrinsic value. If Buffett deems a company’s intrinsic value to be higher than its current price, and its management and business operations to be sustainable, he will almost certainly invest. However, based on his staple of only about 30 stocks, it is fairly apparent that very few companies pass the Warren E. Buffett invest-ability test.

Although we can talk all about Buffett’s accolades over the past 40 years, the numbers speak for themselves. Suffice to say that keeping an eye on the holdings of Warren Buffett is a good idea. If you are not watching the best investor in the world, who are you watching?

Berkshire Hathaway	Average Annual Return	3-Year	5-Year
Common Stock (BRK.a/b)	21.9%	8.48%	9.48%
S&P 500(Benchmark)	10.4%	17.17%	0.64%

Company Name:	Berkshire Hathaway
Portfolio Manager:	Warren Buffett
Focus:	Value
Updates:	Shares Held, Change in Shares, and Position Change as of 9/30/08 - all other information 15 minutes delayed

Ticker	Company	Share Value x1000	Change in Value x1000	Current Value x1000	Shares Held	Change in Shares	% of Portfolio	Position Change
COP	ConocoPhillips	$5,710,262	$5,710,262	$4,438,024	77,955,800	77,955,800	8.17%	Increase
PG	Procter & Gamble Co.	$5,592,762	($843,794)	$4,816,725	80,252,000	(25,595,000)	8.00%	Decrease
KFT	Kraft Foods Inc.	$3,930,416	($3,436)	$3,643,586	120,012,700	(18,259,800)	5.62%	Decrease
WFC	Wells Fargo & Co. Del	$2,481,957	($4,421,097)	$1,835,180	66,132,620	(224,522,248)	3.55%	Decrease
WSC	Wesco Finl Corp.	$2,036,002	($145,429)	$1,919,089	5,703,087	0	2.91%	No Change
USB	US Bancorp	$1,781,615	($132,505)	$1,148,504	49,461,826	(19,169,200)	2.55%	Decrease
JNJ	Johnson & Johnson	$1,703,512	($2,269,769)	$1,474,345	24,588,800	(37,165,648)	2.44%	Decrease
MCO	Moody's	$1,632,000	($21,120)	$1,129,440	48,000,000	0	2.34%	No Change
WMT	Wal-Mart Stores, Inc.	$1,194,464	$73,595	$1,032,915	19,944,300	0	1.71%	No Change
BUD	Anheuser Busch Cos. Inc.	$898,264	$38,213	$727,693	13,845,000	0	1.29%	No Change
AXP	American Express Co.	$893,546	($4,817,626)	$1,097,072	25,220,034	(126,390,666)	1.28%	Decrease
UNP	Union Pacific Corp.	$633,751	($38,652)	$686,118	8,906,000	0	0.91%	No Change
MTB	M & T Bank Corporation	$584,530	$110,850	$569,008	6,549,360	(165,700)	0.84%	Decrease
WPO	Washington Post Co.	$580,487	($433,538)	$393,650	1,042,615	(685,150)	0.83%	Decrease
NKE	Nike Inc.	$511,183	$55,703	$565,128	7,641,000	0	0.73%	No Change
USG	USG Corporation	$437,048	($67,777)	$205,037	17,072,192	0	0.63%	No Change
COST	Costco Wholesale Corp.	$341,142	($27,374)	$297,061	5,254,000	0	0.49%	No Change
KMX	Carmax Inc.	$258,217	($44,030)	$383,637	18,444,100	(2,855,900)	0.37%	Decrease
CMCSK	Comcast Corp	$236,640	$11,520	$210,720	12,000,000	0	0.34%	No Change
GE	General Electric Co.	$198,336	($9,256)	$127,947	7,777,900	0	0.28%	No Change
IR	Ingersoll-Rd Company LTD.	$175,674	($35,281)	$211,880	5,636,600	0	0.25%	No Change
BAC	Bank of America Corp.	$175,000	($42,217)	$69,800	5,000,000	(4,100,000)	0.25%	Decrease
ETN	Eaton Corporation	$163,411	$0	$230,224	2,908,700	0	0.23%	No Change
UNH	United Health Group Inc.	$161,986	($6,014)	$213,408	6,379,900	(20,100)	0.23%	Decrease
LOW	Lowes Companies Inc.	$153,985	$8,735	$131,820	6,500,000	(500,000)	0.22%	Decrease
STI	Sun Trusts Banks Inc.	$144,175	$28,105	$82,839	3,204,600	0	0.21%	No Change
NSC	Norfolk Southern Corp.	$127,984	$6,843	$110,297	1,933,000	0	0.18%	No Change
NRG	NRG Energy, Inc.	$123,750	$0	$114,950	5,000,000	0	0.18%	No Change
KO	Coca Cola	$115,067	($10,280,933)	$123,488	2,176,000	(197,824,000)	0.16%	Decrease
SNY	Sanofi Aventis	$111,253	($18,474)	$102,791	3,384,633	(519,300)	0.16%	Decrease
WBC	Wabco Holdings Inc.	$95,958	$0	$104,868	2,700,000	0	0.14%	No Change
HD	Home Depot Inc.	$95,793	($2,126)	$106,116	3,700,000	(481,000)	0.14%	Decrease
UPS	United Parcel Service Inc.	$89,882	$2,029	$95,328	1,429,200	0	0.13%	No Change
IRM	Iron Mountain Inc.	$82,315	($7,217)	$78,336	3,372,200	0	0.12%	No Change
GSK	GlaxoSmithKline	$65,646	($1,148)	$55,163	1,510,500	0	0.09%	No Change
GCI	Gannett Inc.	$58,299	($16,410)	$45,336	3,447,600	0	0.08%	No Change
TMK	Torchmark Corp.	$31,532	($134,088)	$28,083	527,279	(2,296,600)	0.05%	Decrease
CDCO	Comdisco Holding Co.	$14,466	($220)	$13,082	1,521,162	(16,704)	0.02%	Decrease

http://www.coattailinvestor.com/members/default.aspx

The Investment Secrets of Warren Buffett

BRINGING IT ALL TOGETHER

The remarks of Warren Buffet and analysis by Buffett authors suggest that, at the very least, Warren Buffett looks at the following aspects of a corporation and its operations. They can be put in the form of questions that any sensible investor should ask before considering a stock investment.

BASIC QUESTIONS TO ASK

1. Does the company sell brand name products that are likely to endure?
2. Is the business of the company easily understood?
3. Does the company invest in and operate businesses within its area of expertise?
4. Does the company have the ability to maintain or increase profitability by raising prices?
5. Is the company, looking at both long-term debt, and the current position, conservatively financed?
6. Does the company show consistently high returns on equity and capital?
7. Have the earnings per share and sales per share of the company shown consistent growth above market averages over a period of at least five years?
8. Hs the company been buying back its shares, and if so, has it bought them responsibly?
9. Has management wisely used retained earnings to increase the rate of return to shareholders?
10. Is the company likely to require large capital sums to ensure continuing profitability?

See case studies.

This would only be the first stage of the process. The next, and most important question, is determining the price that an investor such as Warren Buffet would pay for the stock, allowing for the margin of safety.

http://www.buffettsecrets.com/bringing-it-all-together.htm

In 1992, Warren Buffett said that:

‘Leaving question of price aside, the best business to own is one that over an extended period can employ large amounts of capital at very high rates of return. The worst company to own is one that must, or will, do the opposite – that is, consistently employ ever-greater amounts of capital at very low rates of return.’

Be a stock picker: Buy GREAT companies and hold for the long term until their fundamentals change

All the above are GREAT companies.

NEVER buy these GREAT companies at HIGH prices.

You can often buy them at FAIR prices.

On certain occasions, you have the chance to buy them at slightly BARGAIN prices.

Rarely, for example during the recent 2008 Crash, you had the chance to buy them at GREAT prices.

It is better to buy a GREAT company at a FAIR price than to buy a FAIR company at a GREAT price.

It is safe to hold these stocks for the long term since these companies have competitive advantages, selling only when their fundamentals change.

The present prices of these stocks are near or above their previous high prices.

Those who bought regularly into these stocks would have capital gains, through dollar-cost averaging.

Further comments:

1. Warren, on the other hand, after starting his career with Graham, discovered the tremendous wealth-creating economics of a company that possessed a long-term competitive advantage over its competitors.  
2. Warren realized that the longer you held one of these fantastic businesses, the richer it made you.  
3. While Graham would have argued that these super businesses  were all overpriced, Warren realized that he didn't have to wait for the stock market to serve up a bargain price, that even if he paid a fair price, he could still get superrich off of those businesses.  
4. In the process of discovering the advantages of owning a business with a long-term competitive advantage, Warren developed a unique set of analytical tools to help identify these special kinds of businesses.  
5. Though rooted in the old school Grahamian language, his new way of looking at things enabled him to determine whether the company could survive its current problems.  
6. Warren's way also told him whether or not the company in question possessed a long-term competitive advantage that would make him superrich over the long run.  
7. By learning or copying Warren, you can make the quantum leap that Warren made by enabling you to go beyond the old school Grahamian valuation models and discover, as Warren did, the phenomenal long-term wealth-creating power of a company that possesses a durable competitive advantage over its competitors.
8. In the process you'll free yourself from the costly manipulations of Wall Street and gain the opportunity to join the growing ranks of intelligent investors the world over who are becoming tremendously wealthy following in the footsteps of this legendary and masterful investor.

Related:

The Evolution of Warren Buffett

Learning and Understanding the Evolution of Warren Buffett
Li Lu sharing his Value Investing Strategies (Video)
The Three Gs of Buffett: Great, Good and Gruesome

The GREAT company has long-term competitive advantage in a stable industry.  This company:

• takes a one time investment capital and 
• pays you a very attractive return (dividend + capital appreciation), 
• which will continue to increase as years pass by;

Here are the golden words of Buffett on the GREAT businesses to own:

1.  On 'Great' businesses, Buffett says, "Long-term competitive advantage in a stable industry is what we seek in a business.

• If that comes with rapid organic growth, great. 
• But even without organic growth, such a business is rewarding. 
• We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere. 
• There's no rule that you have to invest money where you've earned it. 
• Indeed, it's often a mistake to do so: Truly great businesses, earning huge returns on tangible assets, can't for any extended period reinvest a large portion of their earnings internally at high rates of return."

Think Like Warren Buffett

Think Like Warren Buffett
by Glenn Curtis (Contact Author | Biography)

Back in 1999, Robert G. Hagstrom wrote a book about the legendary investor Warren Buffett, entitled "The Warren Buffett Portfolio". What's so great about the book, and what makes it different from the countless other books and articles written about the "Oracle of Omaha" is that it offers the reader valuable insight into how Buffett actually thinks about investments. In other words, the book delves into the psychological mindset that has made Buffett so fabulously wealthy.

Although investors could benefit from reading the entire book, we've selected a bite-sized sampling of the tips and suggestions regarding the investor mindset and ways that an investor can improve their stock selection that will help you get inside Buffett's head.

1. Think of Stocks as a Business
Many investors think of stocks and the stock market in general as nothing more than little pieces of paper being traded back and forth among investors, which might help prevent investors from becoming too emotional over a given position but it doesn't necessarily allow them to make the best possible investment decisions.

That's why Buffett has stated he believes stockholders should think of themselves as "part owners" of the business in which they are investing. By thinking that way, both Hagstrom and Buffett argue that investors will tend to avoid making off-the-cuff investment decisions, and become more focused on the longer term. Furthermore, longer-term "owners" also tend to analyze situations in greater detail and then put a great eal of thought into buy and sell decisions. Hagstrom says this increased thought and analysis tends to lead to improved investment returns. (To read more about Buffett's ideologies, check out Warren Buffett: How He Does It and What Is Warren Buffett's Investing Style?)

2. Increase the Size of Your Investment
While it rarely - if ever - makes sense for investors to "put all of their eggs in one basket," putting all your eggs in too many baskets may not be a good thing either. Buffett contends that over-diversification can hamper returns as much as a lack of diversification. That's why he doesn't invest in mutual funds. It's also why he prefers to make significant investments in just a handful of companies. (To learn more about diversification, read Introduction To Diversification, The Importance Of Diversification and The Dangers Of Over-Diversification.)

Buffett is a firm believer that an investor must first do his or her homework before investing in any security. But after that due diligence process is completed, an investor should feel comfortable enough to dedicate a sizable portion of assets to that stock. They should also feel comfortable in winnowing down their overall investment portfolio to a handful of good companies with excellent growth prospects.

Buffett's stance on taking time to properly allocate your funds is furthered with his comment that it's not just about the best company, but how you feel about the company. If the best business you own presents the least financial risk and has the most favorable long-term prospects, why would you put money into your 20th favorite business rather than add money to the top choices?

3. Reduce Portfolio Turnover
Rapidly trading in and out of stocks can potentially make an individual a lot of money, but according to Buffett this trader is actually hampering his or her investment returns. That's because portfolio turnover increases the amount of taxes that must be paid on capital gains and boosts the total amount of commission dollars that must be paid in a given year.

The "Oracle" contends that what makes sense in business also makes sense in stocks: An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.

Investors must think long term. By having that mindset, they can avoid paying huge commission fees and lofty short-term capital gains taxes. They'll also be more apt to ride out any short-term fluctuations in the business, and to ultimately reap the rewards of increased earnings and/or dividends over time.

4. Develop Alternative Benchmarks
While stock prices may be the ultimate barometer of the success or failure of a given investment choice, Buffett does not focus on this metric. Instead, he analyzes and pores over the underlying economics of a given business or group of businesses. If a company is doing what it takes to grow itself on a profitable basis, then the share price will ultimately take care of itself.

Successful investors must look at the companies they own and study their true earnings potential. If the fundamentals are solid and the company is enhancing shareholder value by generating consistent bottom-line growth, the share price, in the long term, should reflect that. (To learn how to judge fundamentals on your own, see What Are Fundamentals?)

5. Learn to Think in Probabilities
Bridge is a card game in which the most successful players are able to judge mathematical probabilities to beat their opponents. Perhaps not surprisingly, Buffett loves and actively plays the game, and he takes the strategies beyond the game into the investing world.

Buffett suggests that investors focus on the economics of the companies they own (in other words the underlying businesses), and then try to weigh the probability that certain events will or will not transpire, much like a Bridge player checking the probabilities of his opponents' hands. He adds that by focusing on the economic aspect of the equation and not the stock price, an investor will be more accurate in his or her ability to judge probability.

Thinking in probabilities has its advantages. For example, an investor that ponders the probability that a company will report a certain rate of earnings growth over a period of five or 10 years is much more apt to ride out short-term fluctuations in the share price. By extension, this means that his investment returns are likely to be superior and that he will also realize fewer transaction and/or capital gains costs.

6. Recognize the Psychological Aspects of Investing
Very simply, this means that individuals must understand that there is a psychological mindset that the successful investor tends to have. More specifically, the successful investor will focus on probabilities and economic issues and let decisions be ruled by rational, as opposed to emotional, thinking.

More than anything, investors' own emotions can be their worst enemy. Buffett contends that the key to overcoming emotions is being able to "retain your belief in the real fundamentals of the business and to not get too concerned about the stock market."

Investors should realize that there is a certain psychological mindset that they should have if they want to be successful and try to implement that mindset. (To learn more about investor behaviors, read Understanding Investor Behavior, When Fear And Greed Take Over and Master Your Trading Mindtraps.)

7. Ignore Market Forecasts
There is an old saying that the Dow "climbs a wall of worry". In other words, in spite of the negativity in the marketplace, and those who perpetually contend that a recession is "just around the corner", the markets have fared quite well over time. Therefore, doomsayers should be ignored.

On the other side of the coin, there are just as many eternal optimists who argue that the stock market is headed perpetually higher. These should be ignored as well.

In all this confusion, Buffett suggests that investors should focus their efforts of isolating and investing in shares that are not currently being accurately valued by the market. The logic here is that as the stock market begins to realize the company's intrinsic value (through higher prices and greater demand), the investor will stand to make a lot of money.

8. Wait for the Fat Pitch
Hagstrom's book uses the model of legendary baseball player Ted Williams as an example of a wise investor. Williams would wait for a specific pitch (in an area of the plate where he knew he had a high probability of making contact with the ball) before swinging. It is said that this discipline enabled Williams to have a higher lifetime batting average than the average player.

Buffett, in the same way, suggests that all investors act as if they owned a lifetime decision card with only 20 investment choice punches in it. The logic is that this should prevent them from making mediocre investment choices and hopefully, by extension, enhance the overall returns of their respective portfolios.

Bottom Line
"The Warren Buffett Portfolio" is a timeless book that offers valuable insight into the psychological mindset of the legendary investor Warren Buffett. Of course, if learning how to invest like Warren Buffett were as easy as reading a book, everyone would be rich! But if you take that time and effort to implement some of Buffett's proven strategies, you could be on your way to better stock selection and greater returns.

by Glenn Curtis (Contact Author | Biography)

Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.

http://www.investopedia.com/articles/stocks/08/Buffett-style.asp

Buffett's investing philosophy is simple but not easy.

The thrill of investing in common stocks.

It is the fun of making money and watching it grow.

In the long run, rewards from playing the game of investing are large.

With some effort, you can also outperform the professional mutual fund managers and the market as a whole.

Buffett's investing philosophy is simple but not easy.

It is simple in the sense that all you need to do is to identify outstanding businesses that are run by competent and honest managers and whose common stock is selling at a reasonable price.

But how do you do that?