What happened

Berkshire Hathaway (BRK.A 0.99%) (BRK.B 0.91%) made a big bet on forestry and building products manufacturer Louisiana-Pacific (LPX 1.55%) in the third quarter. On Tuesday, investors are following the Oracle of Omaha's lead.

Shares of Louisiana-Pacific are up as much as 12.3% on Tuesday following the release of Berkshire's most recent list of new investments.

So what

Although Warren Buffett doesn't make all of the calls on Berkshire investments these days, the company's moves in and out of stocks are still closely watched by the markets. In a regulatory filing release Monday night, Berkshire unveiled a new 5.8 million-share position in Louisiana-Pacific that amounts to a 6.7% stake in the timber and building products company.

At first glance, Louisiana-Pacific looks like a classic Berkshire investment. The company has an important role to play as a supplier of housing materials, and should benefit over time from a structural shortage in housing supply. But it has also been caught up in the market's reaction to surging interest rates, and what that might mean for near-term demand for housing. Shares of Louisiana-Pacific were off nearly 50% for the year at various points in the third quarter.

Buffett loves easy-to-understand industries, and is known for seeing value when near-term conditions mean a stock's long-term potential is not reflected in the share price.

Now what

If you are going to invest like Buffett, you need to have the patience of Buffett. The long-term outlook for Louisiana-Pacific is intriguing, but investors should be warned that it is quite possible things will get worse for the company before they get better. The housing sector is a mess, and there is a real risk the U.S. economy will end up in a recession. At best, it will take at least a few quarters for homebuyers to adjust to higher rates and for homebuilders to have the confidence to ramp up building.

Berkshire Hathaway has been a big winner over time because the company is diversified, and it is willing to wait out economic cycles. Those buying into Louisiana-Pacific today based on Berkshire's move would be wise to follow that broader portfolio advice as well.