For each dark cloud, there is a silver lining. Unfortunately, silver linings are often quite elusive.
Warren Buffett, the intrepid octogenarian billionaire investor, is incredibly skilled at finding silver linings, and has made a fortune when others have cowered in fear of the darkest of clouds. He explained his philosophy best in a 2004 letter to shareholders (link opens PDF) of Berkshire Hathaway:
"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful."
This year has been no exception for the keen investor. In the three months to June 30, Berkshire purchased $3.62 billion of stock, its biggest buying binge since it bought $3.94 billion in the third quarter of 2008, according to a recent SEC filing (via Bloomberg).
"He's gotta put the cash to work somewhere ... We've seen the market pull back, and this is the environment he likes to make investments in," Tom Lewandowski of Edward Jones & Co. told Bloomberg.
And despite losing around $1.6 billion the week of the U.S. credit downgrade, Buffett is still busy sniffing out good deals.
"Transatlantic Holdings said yesterday that Berkshire offered about $3.25 billion in a bid to break up the New York- based reinsurer's deal to merge with Allied World Assurance Company Holdings AG. The equity market rout helped push down the value of Allied's all-stock bid by about 13 percent from the last trading day before the June announcement through Aug. 5," writes Andrew Frye of Bloomberg.
In a recent interview, Buffett indicated that he believes the U.S. will probably avoid a recession this year, despite the currently dour market sentiment (via Bloomberg).
Does Buffett know something the rest of us don't? Probably (especially if you believe that wisdom comes with age). But here's what we do know -- Berkshire Hathaway's top holdings as of the end of March, 2011 (its most recent SEC 13-F filing). Begin your investigation into Mr. Buffett's strategy here.
List sorted by market value of the investment as a percentage of Berkshire Hathaway's portfolio. (Click here to access free, interactive tools to analyze these ideas.)
2. Wells Fargo
3. American Express
4. Procter & Gamble
5. Kraft Foods
6. Johnson & Johnson
8. Wal-Mart Stores
9. US Bancorp
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Andrew Dominguez does not own any of the shares mentioned above. Data sourced from Finviz and Whale Wisdom.
The Motley Fool owns shares of Coca-Cola, Wal-Mart Stores, and Johnson & Johnson. The Fool owns shares of and has created a ratio put spread position on Wells Fargo. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson, Coca-Cola, Moody's, Procter & Gamble, and Wal-Mart Stores. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.