We have all heard of the investment advice of invest in what you know.  It is surprising how few people actually follow this advice and this goes for financial wizards as well.  A case in point at what is being blamed for the current collaspe of the mortgage industry and of the top American banks is the complicated investment vehicle of derivatives.  Loans were packaged and repackaged to spread the risk amongst many players.  However, this too came as a pitfall as the financial firms could not retrace what they actually owned.  And with the risk being wide spread, everyone was affected by these “financial weapons of mass destruction” as coined by Buffett.  If the investment firms had taken Buffett’s investment advice, then we would be in a better place financially than we are at now.

Now of course, you might be saying that you would never have invested in something as complicated as derivatives.  Of course not, these investment vehicles are not available to the retail investor.  However, the principle of common sense is still the same.  Most of us do not do the due diligence required when investing.  How many of us havellistened to a “hot investment tip” from a supposed insider and then bought shares in a company that you have no idea what it is they do?  If you don’t know what they do or it can’t be explained easily, the chances are you didn’t go over the stock fundamentals as well.  Warren Buffett might be a genius but there’s no secret in his investment advice.  1) Buy in companies you understand and 2) have the intention of keeping it longterm.  3) Buy in well established companies that has an advantage over it’s cometitors and 4) make sure you buy it at a good value.  If you didn’t go through the stock analysis, then you wouldn’t know if what you bought was cheap or expensive.

If these investment advice seems simple to you, then congratulations, you should be on your way to investing like Warren Buffett and have his success in stock picks.

Buffett built Berkshire Hathaway in the property and casualty business.  With the premiums, it generates a lot of float for Buffett to invest in other companies.  However, the P&C industry is also cyclical in nature.  Buffett himself warned to expect “lower insurance earnings during the next few years”.  So the Oracle of Omaha obviously knew what was coming and notified his Berkshire investors not to panic.  This is in contrast to other funds and investment bankers who got caught with their pants down in the credit crunch.  And people are still complaining?  Sure, stock investments in the insurance and the banking industries are soft but Buffett is also sitting on more than $40 billion in cash just waiting for the opportunity to pick up some under valued companies in the recession.

And lets not forget that every time the U.S. sneezes, the rest of the world catches a cold.  The world’s biggest economy still has a lot of influence in the rest of the world and it is likely that the next additions of stocks to buy could be from abroad.  Here is another Warren Buffett quote to shed some light on Buffett’s views on the U.S. economy: “But, we are still very important in the U.S., and we are still very linked in many ways. But we aren’t as important as we used to be relative to the rest of the world.”

Last year, Buffett went on a highly publicized trip to China and South Korea where he visited the plants of a Berkshire Hathaway subsidiary - Israel’s Iscar MetalWorking.  Obviously, the 77-year old is not being complacent and is looking to add more companies in the Warren Buffett portfolio even if he has to look outside of U.S.

So despite the fact that Warren Buffett’s stock picks and stock investments are being questioned, don’t count the man out.  He clearly has a pulse on the world markets and we should all heed Buffett’s investment advice.

Let’s take a look at the concept behind this.  Warren Buffett stocks are from companies that he wouldn’t mind outright owning.  Take a moment to think about this.   As a shareholder, you are a partial owner.  But Buffett goes a step beyond that.  He wants to be a business owner.  This is not to say he wants to muddle in the daily affairs.  That’s not it at all.  But he wants a piece of the action so he looks for companies that are already well run and leave it at that.  After all, if you believe in the fundamentals, the people and the business has an advantage over its competitors, it’s a good buy.  Contrast this to stock traders nowadays.  That’s what they are - stock TRADERS.  They are not business owners.

If we extend the business owner idea into the brick and mortar business, do you expect to sell it in a few days?  Months?  Or perhaps a more reasonable answer is you’re going to hold it longterm for many years.

Let’s go further.  How many are willing to invest in a brick and mortar store that they don’t understand and haven’t looked at the business plan?  I wouldn’t imagine many.  And yet, so many people are seduced by the call of the stock market.  Leave all this noise out.  According to Warren Buffett investing success, he’s able to focus on the fundamentals of the company with an even temperament.  This means buying when TRADERS are selling at a recession panic.  Warren Buffett stocks are companies he’s scavenged for cheap that he knows are way under priced.  That’s the secret to Warren Buffett investing.

It is always amazing that people would treat their investment dollars as little more than gambling on the stock market. Investing on a company based on a tip is not what is considered doing your due diligence. In fact you’re probably better off investing in index funds. Index funds track the market and have very low management expense ratios so the fees are not eating away at your return. This is what Warren Buffett suggests if you’re not ready to do the research work to actively manage your investment portfolio. However, if you are willing read countless annual reports for fundamental analysis on the correct valuations, you can expect significantly higher than market returns.

Warren Buffett preaches on buying businesses that have distinct competitive advantages with brand associations. In the Warren Buffett portfolio, you’ll see stock picks that exemplify these traits. With companies like Coca Cola and Wrigley’s, and Kraft, each name is synonymous with the type of goods it produces. This type of branding with product and company association gives companies a leg up over competitors. To chip away at this dominance, it would require huge advertising dollars over years and consumers would still retain brand loyalties.

In this period of the 2008 recession, share prices on premium companies have never looked so attractive. One of the most basic principles of stock investing is to buy low and sell high. This template to riches seems simple enough but it is one that is not consistently heeded. Obviously, people don’t intentionally try to buy overpriced stock shares. However, this is what happens most of the time. As Warren Buffett so eloquently put it, “Price is what you pay. Value is what you get.” Hence, if one looks closely, there are many stocks currently on sale with better value than what their depressed share prices would indicate.

The question might arise of when these share prices will go up so you can resell at a profit. Again, referring to the strategy of how to invest like Warren Buffett, our mentor proclaims that the holding period is forever. I do not think this is meant to be literal as Buffett himself has sold his position in companies like Petro China. He’s also selling his shares in his holding company Berkshire Hathaway to give the proceeds to the Bill and Melinda Gates Foundation. However, what Buffett does mean is that when you buy shares of a company, you should be in the mindset of a long term owner might. Another famous quote of his is to “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

The success of Warren Buffett as an investor gives us the confidence to invest in these troubling financial times. The important thing to remember is not to be concerned about market turbulence but to realize a buying opportunity when it arises. The ability to think long term is the key to having great Warren Buffett stock picks.

• companies that are easy to understand
• companies that have a competitive advantage from their competitors
• companies that the shareholder will own for the long term
• companies bought when the valuation was right
• companies that stand the test of time

Let’s look at the latest Warren Buffett stock pick: Wm. Wrigley Jr. Company. Wrigley is the world’s biggest chewing gum company which launched in 1891. Everyone’s heard of it. Everyone’s chewed it. It’s brands include Juicy Fruit, Wrigley’s Spearmint, Doublemint, Excel, Extra, Freedent and many more. How’s that for competitive advantage?

Let’s look at how the deal came about. Wrigley is the typical Warren Buffett stock. It has all the desired qualities of a Buffett company. Warren Buffett got a stake in the company when he helped Mars takeover Wrigley. With the credit crunch, Berkshire Hathaway’s cash position made him one of the few players who could help finance the deal. And it got him a discounted stake in Wrigley in the process.

So what can we learn from this Warren Buffett 2008 stock pick? Iconic companies are on sale. But before we jump the gun on the shopping trip, ask yourself if it has all the ingredients of a Warren Buffett stock pick. Look at the fundamentals of the company. Do not pay attention to the macroeconomics but look at the history of the company. Is it a simple business? Does it have a business moat? Is it a company worth holding forever?

If you answer to these questions is yes, then you just might have discovered a Warren Buffett stock pick.

For all intents and purposes, Warren Buffett already thinks that the United States is in a recession and it will be longer and deeper than what people are predicting. Let’s get one thing clear. Fortunes are made when people are in a panic. Stay the course of finding good companies and come out looking like a rose. Here’s your chance of making a fortune buy learning how to invest like Warren Buffett.

Warren Buffett has been known to avoid investing in tech stocks. The reason is that it’s a highly competitive and unpredictable market. During the dot com days, people were indeed thinking long term – that the web is the future. Warren Buffett was derided as a has-bean and out of touch with the tech age. But guess who had the last laugh? Warren Buffett was right to be cautious during the tech bubble. Despite his warnings, no one paid attention to the high price per earnings ratio which reflected the the lack of earnings. And, in Warren Buffett investing, a proven company with a good management team are a must. Also, the business must be simple to understand with a competitive advantage.

There are no certainties in life but given a guess, would anyone care to predict if Google will still be the dominant search engine in twenty years time? Compare this with the certainty that the world would probably still be drinking Coca Cola in the future, one of Warren Buffett’s stock picks.

The brand of Coca Cola is indomitable. It is a 100 year old company known throughout the world and there is still growth to be had in the developing nations. Warren Buffett’s pick of Coca Cola shows that growth can still occur in proven companies.

The bottom line to long term Warren Buffett investing is how certain are you with the future of the company in question? Remember that by being a shareholder of a company, you are part owner. If we expand this idea, does it make sense to you to own a business for one year? Five years? No, most people would own a business for the long term which is 10 years or more. Also, keep in mind that by buying and holding, you are not incurring the trading commissions. By trading frequently, this will erode your capital.

In summary, in Warren Buffett investing style, look for a proven company with long term prospects. Remember too, that Warren Buffett is a growth investor so pay companies what they are worth if it is a simple business who has a hold on the marketplace already and looking to expand globally.

By following Warren Buffett investments, you can see that the Oracle of Omaha has reproduced his winning stock formula countless of times by using his basic rules and investing strategy.

We all want to have a Warren Buffett portfolio - that is, a stock portfolio that stands the test of time to beat the market 28 out of 31 years.

The economy goes through cycles as we have seen in the dot com era and the housing bubble. A lot of people made money before the crash but have they been as consistent as Warren Buffett stock picks regardless of bear or bull markets?

What is considered a Warren Buffett stock?

A perfect example of a Warren Buffett stock pick is Coca Cola. This is because the business is incredibly simple and easy to understand. The Coca Cola Company actually only produces the syrup concentrate - which costs a pittance to make. To distribute the drink world wide, it sells franchise rights to bottlers in different geographical locations all over the world who then mix in the carbonated water and sweeteners.

There you have the key ingredients to a Warren Buffett investment: simple to understand, huge profit margins and global distribution dominance. And let’s also not forget the branding power of a 100 year old plus Coca Cola name with its advertising campaigns to world events such as the Olympics.

This Warren Buffett strategy of a moat business and how Coca Cola fights off competition from Pepsi and other local store brands. Coca Cola is the ultimate Warren Buffett stock pick that stands the test of time.

So why not just buy Berkshire Hathaway shares? Anyone got $130k lying around for Class A shares? The Class B shares are more reasonable at $4k. However, as great a holding company as Berkshire Hathaway is, there is a worry that 77-year old Warren Buffett will not be at the helm of Berkshire Hathaway much longer. When Warren Buffett passes on, the share value will drop. Currently, one could say that Berkshire shares are not fairly valued because it is trading at a premium for that Buffett branding.

Warren Buffett Investment Strategy

There is much we can learn from Warren Buffett’s strategy. Warren Buffett invests in businesses that he understands. He likes the concept of business moats to protect the business from competition. He also likes that the company is run by good management. And to top everything off, Warren Buffett’s stock picks have to be priced right.

Can individual investors maintain such discipline as Warren Buffett? Perhaps. Individual investors hold the advantage because they have a smaller portfolio than Berkshire Hathaway. Berkshire Hathaway has to make big purchases in order to get noticeable returns. Individual investors do not have such a burden. Also, individual investors have their own unique perspectives of businesses they understand. Combining the strategy of following Warren Buffett stock picks and personal knowledge, an investor can beat Wall Street.