Warren Buffett is never out of the headlines for long.
From his recent criticism of Kraft Foods (KFT, news, msgs) for spending $19 billion to acquire British confectionary giant Cadbury to his controversial defense of Moody's (MCO, news, msgs) and other ratings agencies that missed a massive speculative bubble in the housing market, Buffett's every move is scrutinized.
Buffett's homespun dictates -- be fearful when others are greedy and be greedy when others are fearful -- are echoed by value investors eager to emulate the most successful investor of our time.
Admirers are hungry to pick Buffett's brain -- someone recently bid a record $2.6 million for the right to have lunch with him. Those who can't afford that kind of access can pick up clues to Buffett's investment strategy by noting which companies the world's third-wealthiest man is buying and selling.
Here's a look at some of the sectors favored by Berkshire Hathaway (BRK.B, news, msgs), Buffett's flagship investment vehicle:
Food and beverage
Buffett's largest holding is Coca-Cola (KO, news, msgs), a company selected for its high profit margins and low business risk.Berkshire recently owned 200 million shares of Coca-Cola worth nearly $10.3 billion.
Berkshire Hathaway sold 31 million shares of Kraft to raise cash to help pay for Buffett's biggest acquisition yet, the $27 billion deal earlier this year for the 77% of railroad operator Burlington Northern Santa Fe it didn't already own. Berkshire remains the biggest shareholder in Kraft, the nation's biggest food company, with about 107 million shares, a roughly 6% stake.
Financials
Moody's has come under scrutiny for assigning overly optimistic ratings to complex financial products packed with risky mortgages that went bad when the housing market collapsed in 2007. Because Berkshire is Moody's biggest shareholder, with a 13% stake according to the company's most recent quarterly filing to the Securities and Exchange Commission, Buffett was subpoenaed by the congressional panel looking into the causes of the financial crisis.
Buffett told the Financial Crisis Inquiry Commission that if he didn't see the housing bust coming, he couldn't blame the credit ratings agencies for missing it either, a line of reasoning that generated some rare criticism of the Oracle of Omaha.
Among other major financial companies in Berkshire's portfolio are Wells Fargo (WFC, news, msgs) and American Express (AXP, news, msgs). After falling to nearly $10 during the darkest days of the recession, AmEx shares have added more than 300% to trade at above $42.
Energy
Buffett is not typically known for energy plays, but he holds significant positions in oil and gas major ConocoPhillips (COP, news, msgs) and utility operator NRG Energy (NRG, news, msgs), as well as a minor $26 million investment in Exxon Mobil (XOM, news, msgs), the world's largest oil and gas company.Berkshire Hathaway sold about 9% of its Conoco stake as Buffett was raising money for his big railroad purchase, but Berkshire still owns shares worth more than $1.8 billion in the Houston company.
Consumer staples
Procter & Gamble (PG, news, msgs), Johnson & Johnson (JNJ, news, msgs), Wal-Mart Stores (WMT, news, msgs) and Nike (NKE, news, msgs) are some of the companies Buffett likes that are closely tied to the health of the consumer.
Buffett has lauded each of these companies for superior management, a key component of his investment decisions.
The bottom line
Buffett is a consistent advocate of a buy-and-hold investment strategy. Coca-Cola has been a staple of Berkshire's portfolio since 1988; American Express has been a key holding for even longer.With an accumulated net worth estimated by Forbes at $47 billion, Buffett has earned the respect of investors everywhere, the occasional misstep notwithstanding.
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