April 04. 2012 10:22AM

The Buffett table is bountiful

By Steve Jagler

Hockey legend Wayne Gretzky was once asked what made him so great. His response was that he did not skate to where the puck was at. He skated to where the puck was going.

In the realm of finance, if Gretzky were to skate to where the puck is going, he would probably find Warren Buffett was already there, waiting for him with a gecko on his shoulder.

Let's forget the whole political kerfuffle over the "Buffett Rule" for a moment and account instead for where the Oracle of Omaha is investing his money.
Buffett's investment acumen, of course is, beyond reproach. The chairman of the board of Berkshire Hathaway Inc. achieved a compounded annual gain of 19.8 percent from 1965 through 2011. Compare that with the S&P 500 return, with dividends included, of 9.2 percent in that same span.

So, when Buffett recently posted his annual letter to shareholders, it was worth taking note.
The first thing I have always noticed about Buffett's annual letters is his underlying sense of optimism in the American experiment.

The second thing is his clever sense of humor. Yes, this man is enslaved to the bottom line, but he sees the humanity along the way.
The third thing is, though you and I may never be rich enough to own shares in Berkshire Hathaway, we are investing in Buffett's companies, whether we want to or not. That's because he owns significant shares of the products and services we buy every day, from energy, insurance, jewelry, furniture, soft drinks and shoes to underwear and ice cream.
Berkshire's subsidiaries include Fruit of the Loom Companies, GEICO Auto Insurance, Helzberg Diamonds, International Dairy Queen Inc. and MidAmerican Energy. Buffett also owns hefty shares of brands such as American Express, Bank of America, The Coca-Cola Company, Conoco Phillips, Directv, Dollar General Corp., Exxon Mobile Corp., Gannett Inc., General Dynamics Corp., General Electric Co., GlaxoSmithKline, Intel Corp., IBM, Johnson & Johnson, Kraft Foods Inc., Mastercard Inc., Procter & Gamble Co., US Bancorp., United Parcel Service Inc., Visa Inc., Wal-Mart Stores Inc., Washington Post Co. and Wells Fargo & Co.

You could not boycott Warren Buffett if you tried.
A couple of quotes from his latest letter to shareholders:

* "Housing will come back – you can be sure of that…Inevitably, we ended up with far too many units and the bubble popped with a violence that shook the entire economy," Buffett wrote. "That devastating supply/demand equation is now reversed: Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while 'doubling-up' may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure."
* "In 2007, the bubble burst, just as all bubbles must. We are now in the fourth year of a cure that, though long and painful, is sure to succeed. Today, household formations are consistently exceeding housing starts," Buffett wrote.

* Buffett is loading up on stock in BNSF Railway Company. "Measured by ton-miles, rail moves 42 percent of America's inter-city freight, and BNSF moves more than any other railroad – about 37 percent of the industry total. A little math will tell you that about 15 percent of all inter-city ton-miles of freight in the U.S. is transported by BNSF. It is no exaggeration to characterize railroads as the circulatory system of our economy. Your railroad is the largest artery."

Watch the puck.

Steve Jagler is executive editor of BizTimes Milwaukee.