In June, financial advisor and CNBC contributor Dennis Gartman even called Buffett “an idiot.”

But now that Berkshire has rallied more than 35% from its March lows, the only idiots to be found are those that ever doubted the world’s second-richest man’s business savvy. Indeed, many of the moves Buffett made during last year’s market melee are paying off in a big way.

Take, for instance, his $5 billion investment in Goldman Sachs Group Inc. (NYSE: GS). Berkshire last September agreed to buy $5 billion in perpetual preferred Goldman shares that pay 10% interest.  In addition, Berkshire received warrants giving it the right to buy $5 billion worth of Goldman’s common shares at any time over the next five years at a price of $115 per share.

Critics lampooned that deal when shares of Goldman Sachs fell to a 52-week low of $47.41 in November. Since then, however, Goldman’s stock has rocketed more than 240% to close yesterday (Tuesday) at $160.25.

If Berkshire cashed in it’s warrants today, it would make a 40% profit or about $2 billion. But Warren Buffett has always been a long-term investor, which makes that highly unlikely.

“We will hold the warrants,” Buffett said on Fox Business Network. “Every instinct in my body tells me that we will want to hold those warrants until they’re very close to their expiration date. The preferred pays us the dividend and the warrants are going to make us the money.”

While Berkshire waits, the $5 billion in preferred Goldman shares pay an annual interest of $800 million in dividends.

Berkshire’s total stake in Goldman is now worth more than $9 billion – $4 billion more than the company paid for it – according to University of Louisiana finance professor Linus Wilson.

Berkshire’s investment in BYD Co. Ltd., a Chinese producer of both cars and specialized batteries, has also paid off.  Berkshire’s MidAmerican Energy Holdings Co. agreed last Sept. 26 – just three days after the Goldman deal was announced – pay roughly $230 million for a 9.89% stake in BYD. MidAmerican bought 225 million shares of BYD at a HK$8 a piece. Those shares have since risen 430% to close yesterday at HK$42.40, handing Buffett a paper profit of about $1 billion.

Berkshire reported second-quarter profit of $3.3 billion, up from $2.88 billion a year earlier. The boost was largely attributable to derivative gains, which soared to $2.36 billion from $689 million the year prior.

Berkshire’s book value rose 11.4% in the second quarter, to $73,806 a share, and Barron’s estimates that it already could have increased since to around $79,000 now.

What Buffett’s Buying

So if Buffett’s supposedly cold hand has suddenly turned hot, how can investors benefit? Simple: By following the leader.

A 2007 study by two university professors titled “Imitation is the Sincerest Form of Flattery” showed that buying what Buffett has bought – even a month after his purchases – is a pathway to superior returns.

“The market … appears to under-react to the news of a Berkshire stock investment since a hypothetical portfolio that mimics Berkshire’s investments created the month after they are publicly disclosed earns positive abnormal returns of 14.26% per year,” the study said.

And according to a regulatory filing disclosed Aug. 14, Berkshire is reading the tealeaves on healthcare reform. As of June 30, the company had loaded up 1.2 million shares of Becton Dickinson & Co. (NYSE: BDX), a maker of such medical equipment as scalpels, catheters and syringes, while winding down its positions in healthcare insurers. Berkshire cut its holdings in WellPoint Inc. (NYSE: WLP) by 27% to 3.5 million shares and sold 3.4 million shares, or 24%, of its UnitedHealth Group Inc. (NYSE: UNH) stock.

“If the government is going to open health care to more people, demand for health care supplies would increase,” Gerald Martin, a finance professor at American University’s Kogod School of Business told Bloomberg. “The plan that’s going through Congress could be a real negative to the health insurers, but the people who provide the supplies could really benefit.”

Berkshire also increased its holdings in Johnson & Johnson (NYSE: JNJ), the world’s largest maker of health-care products, by 14% to 36.9 million shares. The purchase of J&J shares marks the second straight increase in the size of Berkshire’s stake, according to Bloomberg.

All of the biggest holdings listed in Berkshire’s filing gained in value in the second quarter. American Express Co. (NYSE: AXP) rose 71% in the period, Wells Fargo & Co. (NYSE: WFC) rose 70%, and Burlington Northern Santa Fe Corp. (NYSE: BNI) jumped 22%. Berkshire’s single largest holding, The Coca-Cola Co. (NYSE: KO), rose 9.2% in the three months ended June 30.

Source: Berkshire’s Back, So What’s Warren Buffett Buying Now?

Here are listed sales in the filing, courtesy of 24/7WallStreet.com:

· 7/20/09… 1,817,000 at $28.7269 average in open market sale.

· 7/21/09… 3,915,100 at $26.9188 average in open market sale.

· 7/22/09… 2,254,200 at $26.6425 average in open market sale.

What took Buffett so long to start selling Moody’s? We have no idea. Moody’s runs one of the biggest scams on Wall Street. It charges the companies whose securities it rates (just like Standard & Poor’s and Fitch also do).

So what do you think these ratings agencies did when presented with a whole load of junk mortgage-backed securities to rate? They assigned them investment grade status and pocketed the cash.

If these ratings agencies had instead acted honestly and responsibly (rather than pimping themselves out to the highest bidder) the whole subprime debacle and the ensuing credit crisis could have been avoided.

Buffett isn’t the only investment whizz who thinks Moody’s is heading for trouble. Hedge-fund legend David Einhorn of Greenlight Capital is selling Moody’s short.

Yesterday, Moody’s shares tumbled almost 4% on the news that the Buffett had began to unwind his position in the company. We’d like to see Moody’s go out of business. But that’s maybe wishful thinking. Make sure you don’t own any shares in Moody’s. And if you’re feeling speculative, consider going short Moody’s along with Einhorn.

One of the easiest ways of deciding what stocks you should own is by “standing on the shoulders of giants.” We’re no geniuses here at Notes. But at least we are smart enough to recognize it. And that’s why we track what people far smarter than us are doing with their money.

As of the end of the first quarter this year, this is how Warren Buffett’s holdings (via Berkshire Hathaway, his investment vehicle) looked like:

1. American Express Co. (NYSE:AXP) over 151.6 million shares, same as before.

2. Bank of America Corp. (NYSE:BAC) 5 million shares; same as last quarter.

3. Burlington Northern Santa Fe (NYSE:BNI) 76.77 million shares; HIGHER than 70.089 million shares of last quarter.

4. Carmax Inc. (NYSE:KMX) 12 million shares; LOWER than the 17.63 million and that is two straight quarters of declines.

5. Coca Cola (NYSE:KO) right at 200 million shares, still same as before.

6. Comcast (NASDAQ:CMCSA) 12 million shares, same as before.

7. Comdisco Holdings (NASDAQ:CDCO) roughly 1.5 million shares, same as before.

8. ConocoPhillips (NYSE:COP) is really lower than the 71.228 million shares reported as this has been used for cutting taxes, and we already know that the number is lower than what the filing says.

9. Constellation Energy Group (NYSE:CEG) was just updated this week so the number is actually about 12.4 million rather than what the filing shows as being 14.828 million shares.

10. Costco Wholesale (NASDAQ:COST) 5.254 million shares, same as before.

11. Eaton Corp. (NYSE:ETN) 3.2 million shares; looks like new holding but may have been missed before.

There’s a lot of talk these days about how Buffett has lost his touch. This may be so. But the guy remains the world’s most successful investor. If you have a medium- to long-term investment horizon, you could do a lot worse than consider following Buffett into some of these long positions. If you think you can outsmart the guy, go ahead. But we know who our money would be with…

And even though the current rally is beginning to lose some steam, there are still plenty of reasons to like railroads over the long haul. They’re clean, efficient, and their development is a fixture of President Barack Obama’s economic, political, and social agendas.

Obama Fast Tracks Railroad Investment

President Obama envisions high-speed rail as a big part of the United States economic recovery, as well as the country’s societal progression.

Earlier this year, Obama outlined his plan to devote at least $13 billion to developing high-speed rail over the next five years.

“Railroads were always the pride of America, and stitched us together. Now Japan, China, all of Europe have high-speed rail systems that put ours to shame,” Obama said.

While most passenger trains in the United States travel at the maximum allowable speed of 79mph, trains in Europe and Asia typically travel in excess of 125mph. In France, for example, the Train Ga Grande Vitesse (TGV) travels at an average speed of 133 mph. Another French train actually reached 357.2mph in 2007, setting a new world record, The Associated Press reported.

Japan, which opened its first high-speed rail in the 1960s, transports more passengers than any other rail system on earth, and its Shinkansen trains travel at an average speed of 180mph. And Germany, Spain and China all of have trains capable of traveling as fast as 140mph.

There are 10 “potential” 100-600 mile corridors in the United States that could be carrying similar high-speed trains sometime in the not-so-distant future, according to a fact sheet released by the Federal Railroad Administration (FRA).

Developing a high-speed rail system, “similar to how interstate highways and the U.S. aviation system were developed in the 20th century,” would bring a host benefits including more manufacturing jobs, more choices for travelers, and less dependence on oil, the fact sheet said.

“The potential economic benefits of a high-speed rail link between Chicago and Milwaukee, so that people are avoiding I-94, or the link between Chicago and St. Louis, Detroit, all those Midwestern cities, I think is enormous and is a very real option,” Obama, a Chicago native, said. “Although gas prices are low right now, it becomes a very meaningful option for people who don’t want to take off their shoes (for screening), drive to an airport, pay for parking, and suffer delays.”

High-speed passenger trains also figure in to the administration’s “green” agenda. Developing all 10 high-speed corridors could eliminate 6 billion pounds, or about 3 million tons, of greenhouse gas emissions each year.

“My high-speed rail proposal will lead to innovations that change the way we travel in America,” the President said. “We must start developing clean, energy-efficient transportation that will define our regions for centuries to come.”

The American Recovery and Reinvestment Act (ARRA) set aside $8 billion as part of what the Obama administration called a “down payment” on a new, cleaner high-speed railroad system, with another $5 billion included in the president’s budget to be dispersed over the next five years.

“To have the federal government now coming out even with $8 billion is great. It lets us look to the future and see what we could really do to develop high-speed,” Washington state rail division deputy director Andrew Wood told the BBC. “When I was at school in England teachers always said whatever America does Europe will do in 15 years. This is the roles reversed – the Obama plan’s the first step.”

Profits Coming Down the Track

While many U.S. rail companies, such as Burlington Northern, are focused primarily on freight transportation, they still stand to benefit from the Obama administration’s railroad revolution, because the first phase of development means upgrading existing track.

“It’s very likely that all of the money will go to significant improvements of existing tracks,” Ross Capon, head of the National Association of Railroad passengers, told The AP. “It’s not going to build bullet trains.”

That’s good news for companies like BNSF, whose railway system alone adds up to more than 50,000 miles of operated track. These companies also have long histories of operations in the Pacific Northwest and Midwest.

Shortly after the announcement by the Obama administration, Oregon Governor Ted Kulongoski and Washington Governor Chris Gregoire sent the White House a letter applauding its “bold rail vision and supporting critical infrastructure investments that will improve mobility, create and preserve jobs, and benefit air quality across our country,” the Northwest Progressive Institute Advocate reported.

“Our states, along with British Columbia, have a committed partnership with BNSF [Burlington Northern Santa Fe] and Amtrak,” the letter said. “Together, we welcome federal ARRA funds – and the jobs that we’ll create with those funds – to help advance our service and improve our infrastructure.”

Burlington Northern’s focus on clean energy further aligns its goals with that of the Obama administration and local politicians.

BNSF last year acquired 200 fuel-efficient locomotives from General Electric Co. (GE). The engines burn 20% less fuel than their predecessors, BusinessWeek reported. And this year, Burlington Northern will become the first company in the industry to deploy a hydrogen-powered locomotive.

For years now, Burlington has provided potential customers with data showing exactly how much more carbon-friendly their hauls would be if they used trains instead of trucks.

For instance, a train carrying 100 tons over 1,000 miles produces 45% less pollution than a long-haul truck does, according to BNSF.

And unlike trucks, trains don’t get stuck in traffic.

“Congestion costs the industry $8 billion a year,” said Ray Kuntz, president of the American Trucking Association. “And it’s growing at 8% to 10% per year.”

CSX has also developed a low-emissions locomotive with three clean diesel engines.

“We’re already three to four times more fuel efficient than trucks and we want to take to the next level and really put a green product out there,” Michael Ward, Chairman and CEO of CSX told Fox Business. “This locomotive will reduce the emissions of particulates and NOx (nitrogen oxide) by 80% and the emissions of CO2 by 50%.”

Ward said his company is investing $1.6 billion in clean technology this year.

“We think long-term more and more people are going to turn to the railroads to relieve highway congestion and because of our small environmental footprint,” he said. “So we’re making investments in the future even in this tougher time.”

Source: Obama’s High-Speed Vision Gets Railroad Companies Back on Track

“I’m more interested in exploiting Buffett than defending him,” Hough writes. “The shortest path to being a great investor is to copy one.”

He recommends against Berkshire shares because of its concentration in financial service companies. “Investors who prefer to avoid that can simply cherry-pick from its holdings, which are reported quarterly.”

Hough chose five stocks that “Buffett says he still likes but that Berkshire has trimmed its stake in to make room for new purchases.”

The selections: Burlington Northern (NYSE:BNI); Eaton (NYSE:ETN), an industrial products company; ConocoPhillips (NYSE:COP); Kraft (NYSE:KFT); and NRG Energy (NYSE:NRG), a utility.

More from Jason in Money Morning:

Last month, the iconic investing guru once again displayed his enthusiasm for railroad stocks by adding to his already sizeable stake in Burlington Northern Sante Fe Corp. (NYSE:BNI). After picking up 7.85 million shares of Burlington in early October, Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A, BRK.B) last week added another 825,000 shares to its holdings at a price of $79.65 apiece

Buffett has been bullish on railroad stocks for the past year. Buffett made his first move on Burlington Northern in April 2007, acquiring nearly 40 million shares – close to 11% of the railroad. That August, Berkshire went shopping again, loading on an additional 3.3 million shares of Burlington. He added another 6,000 in September.

Buffett continued the trend in 2008, adding 10,300 shares of Burlington to his holdings over a two-week period that ended Jan. 22.

With the purchases made last month, Berkshire’s total stake in the Fort Worth, Texas-based railway has climbed to 18.9%.

And Burlington Northern hasn’t disappointed. Just last month, the second-largest U.S. railroad reported a 31% increase in third-quarter profit. For the three months ended Sept. 30, the company reported net income of $695 million, or $2.00 a share – a 31% increase from the year-ago results of $530 million, or $1.48 a share last year. Revenue jumped 20%, reaching $4.91 billion.

“While we are all concerned about the current financial and economic situation, we continue to be optimistic about the future of our diverse franchise and we remain confident about our long-term prospects,” Matthew K. Rose, the company’s chairman, president and chief executive officer, said in a statement.

Warren Buffett is confident, as well, though not too long ago, Buffett himself wrote off the entire railroad industry as a poor investment.

“Warren and I have hated railroads our entire life,” Charles T. Munger, the vice chairman of Berkshire Hathaway, said last year. “They’re capital-intensive, heavily unionized, with some make-work rules, heavily regulated, and long competed with a comparative disadvantage versus the trucking industry, which has a very efficient method of propulsion (diesel engines) and uses free public roads. Railroads have long been a terrible business and have been lousy for investors.”

The reason for the change of heart can be attributed to three factors, says Burlington Northern’s Rose.

“I refer to it as a ‘three-legged’ stool,” Rose told BusinessWeek. “Fuel, congestion on highways, and carbon.”

Burlington Northern On Track

Diesel prices have more than doubled in the past five years, and trains use only just a quarter of the fuel that trucks do. Even with the recent decline in oil prices, Rose says railway transit will maintain an advantage over trucking as long as crude stays above $25 a barrel.

Just to be on the safe side, Rose acquired 200 fuel-efficient locomotives from General Electric Co. (NYSE:GE). The engines burn 20% less fuel than their predecessors, BusinessWeek reported. Additionally, Burlington Northern next year will become the first company in the industry to deploy a hydrogen-powered locomotive.

More fuel efficiency not only shields Burlington Northern from high oil prices, it also gives Rose an extra bargaining chip when it comes to dealing with more environmentally conscious businesses.  For years now, Burlington has provided potential customers with data showing exactly how much more carbon-friendly their hauls would be if they used trains instead of trucks.

For instance, a train carrying 100 tons over 1,000 miles produces 45% less pollution than a long-haul truck does, according to Burlington.

In addition to being more fuel-efficient, Rose makes the argument that trains are simply more efficient – period.

While it takes just two train employees to drive a 9,000-foot, 300-car train, it would take 300 truck drivers to move the same amount of freight.  That is, in part, because of new regulations enacted in the trucking industry that cap the total number of hours a driver can spend behind the wheel.

And unlike trucks, trains don’t get stuck in traffic – accounting for the third and final leg of Rose’s “three-legged stool” – traffic congestion.

“Congestion costs the industry $8 billion a year,” said Ray Kuntz, president of the American Trucking Association. “And it’s growing at 8% to 10% per year.”

No doubt, Burlington Northern is exceptionally well positioned.

The company controls approximately 32,000 miles of railway track throughout the United States and Canada. Burlington’s rails cover two thirds of the continental United States and its abundance of West Coast rail terminals and make it a vital artery in America’s Asian trade network. In fact, many containers coming into U.S. ports are delivered to shore and then placed directly onto Burlington Northern flatbed cars.

Over the past five years, U.S.-China trade has increased by 114%, reaching $386.7 billion.

Burlington has expanded its operations in lockstep. Rose spent $2.6 billion, or 16% of the company’s $15.8 billion in 2007 sales, to expand and improve the company’s rail network, BusinessWeek reported.

“Railroads – now, that’s an example of changing our minds,” Berkshire’s Munger said. “We threw out our paradigms, but did it too late. We should have done it two years ago, but we were too stupid to do it at the most ideal time.”

Berkshire may have been a little late, but the train still hasn’t left the station. Shares of Burlington Northern closed at $89.06 Friday, up $2.47 – or 2.85%  – each.

Source: Railroad Play Burlington Northern Hauling Gains for Warren Buffett’s Berkshire

Alexander Green says BRK’s drop creates an outstanding buying opportunity. Buffett has an unrivaled track record as an investor. He has always followed a disciplined value-based strategy. And this still holds true today.

BRK.B shares are trading at $3,860, down from a 52-week high of $5,059. This makes them a no-brainer buy right now.

This from Investment U:

Warren Buffett’s holding company Berkshire Hathaway has been the single greatest investment of our lifetimes.

His compounded annual gain from 1966 to 2007 was 21.1% for an overall gain of 400,863%, compared to 10.3% and 6,840% for the S&P 500. However, Buffett experienced a rare earnings letdown during the second quarter of this year.

Although revenue increased 10% to $29.3 billion, insurance related write-downs hurt the company’s bottom line. Still, the shortfall was far from cataclysmic. For the quarter, earnings fell 7.6% to $2.88 billion. Despite the shortfall, the company still maintains a top-notch credit rating and has over $28 billion in cash, a war chest for the world’s greatest investor.

How has Warren Buffett’s investment strategy been so successful? He takes a disciplined value approach to investing. And he sticks with it.

Warren Buffett’s Investing Questions

Before Warren Buffett invests a dime, he asks:

• Is the company in an industry with good economics? That is, is it not in an industry competing on price?
• Does the company have a consumer monopoly or brand name that commands loyalty?
• Can anyone with an abundance of resources compete successfully with the company?
• Are the earnings on an upward trend with good and consistent profit margins?
• Is the debt-to-equity ratio low, or is the earnings-to-debt ratio high? Can the company repay debt even in years when earnings are lower than average?
• Does the company have high and consistent returns on invested capital?
• Does the company retain earnings for growth?
• Does the business have high maintenance cost of operations, high capital expenditure or investment cash outflow? (If so, that’s not good.)
• Does the company reinvest earnings in good business opportunities? Does management have a good track record of profiting from these investments?
• Is the company free to adjust prices for inflation?

In short, he makes companies jump through a lot of hoops before he considers putting them in his portfolio.

Buffett’s Investment Strategy – Concentrated Purchases

Buffett also makes concentrated purchases within his investment strategy. For its size, Buffett’s portfolio has few stocks. But once a downturn comes, he buys millions of shares of solid businesses at reasonable prices.

Berkshire is a major player in the markets for insurance, soft drinks, chocolates, shoes, jewelry, publishing, furniture, steel, energy, homebuilding and private jets.

Berkshire owns significant portions in well-known, cheap dividend paying stocks like:

• Coca-Cola (NYSE:KO)
• Wells Fargo (NYSE:WFC), one of the few U.S. banks in good standing.
• Procter & Gamble (NYSE:PG)
• Anheuser Busch (NYSE:BUD), which has seen a major boost in its share price thanks to the takeover bid from InBev.
• Conoco Phillips (NYSE:COP)
• Kraft Foods (NYSE:KFT) and others.

What is Warren Buffett Buying Now?

Besides buying large chunks of Swiss Re (OTC:SWCEY.PK), a major reinsurer, Buffett has been buying unloved – but sound – financial stocks.

He’s increased his position in the Midwestern banking powerhouse U.S. Bancorp (NYSE:USB). (Documents show Berkshire is now the company’s largest shareholder.)

Many household financial stocks have imploded in 2008. Bear Stearns and IndyMac, for example, are gone. Lehman Brothers is down 80% this year. Yet USB has held steady.

Buffett is also buying more Burlington Northern (NYSE:BNI), acquiring shares during the recent market weakness.

Warren Buffett’s Investment Strategy & The Economic Downturn

Why is Buffett buying companies if by his own admission, the economic downturn, is likely to be deeper and longer lasting than generally expected?

• First off, because he knows that nobody can accurately or consistently predict something as big, diverse and dynamic as the global economy.
• Secondly, he knows that even if you somehow knew what was going to happen in the economy, you still wouldn’t necessarily know what is about to happen in the stock market. Perversely, stocks sometimes fall during good times. They often rally during bad times.
• Thirdly, Buffett knows that the stock market is a discounting mechanism. It takes the news and reflects it into stock prices immediately. Who in their right mind would sell their stocks today because he realizes the economy is slowing down? We’ve known that for months now.

Buffett knows that nothing beats the long-term returns available in equities. Where else can you put your money to work today? With real estate caught in a death spiral? In bonds that pay less than 5%? In money markets yielding 2%?

When we first recommended Berkshire Class B shares in February 2001, they were trading at $2,295. At the peak, shares traded as high as $5,059 in December 2007, a 123% return in a little more than seven years.

Yet the B shares are currently trading at $3,860, off 24% from the 52-week high and 20% year-to-date.

History shows that when Berkshire is down 24%, it’s not just a good buy… it’s an outstanding one.

Source: Warren Buffett’s Investment Strategy, Time to Buy the Ultimate No-Brainer

But contrarian investors should be wary of such ‘expert’ opinion. Floyd Brown in Investment U says: “Trucking is an integral part of our national goods transportation network. And because it’s tied so closely to our economy, it will also be one of the first sectors to see a turnaround.“

Floyd says savvy investors should follow Warren Buffett into undervalued transport stocks now…

Even Warren Buffett – the closest person America has to a modern day industrialist – has used the last few years to build an increasing stake in transportation stocks like Union Pacific (NYSE:UNP), Norfolk Southern (NYSE:NSC) and his biggest purchase by far, Burlington Northern Railroad (NYSE:BNI).

• BNI transports goods eastward from Pacific shipping ports, and commodities such as coal and corn around the Midwest over 32,000 miles of track in 28 states and Canada. It is currently trading at a forward PE of 14.
• Railroads are coming back into vogue as their economy and their cost effectiveness make them popular again. That’s why Warren Buffett took a $5 billion stake in the railroads.
• Trucking also deserves a look. YRC Worldwide (Nasdaq:YRCW) and Knight Transportation (NYSE:KNX) were hurt along with the rest of the sector with the spike in diesel costs this spring. With energy prices starting to settle down, the larger concern for trucking companies is the overall economy, as a continued slowdown will be just as costly.

Transportation Stocks – Calling All Contrarian Investors

For contrarian investors like myself, buying when the rest of the crowd isn’t in love with a particular sector or company is par for course, as is the case with transportation stocks. The secret is to find value that everyone else is missing…

For example, YRC Worldwide is trading in deep value territory at only 62% of book value. With revenue over $165 per share, this firm is selling at approximately 10% of its sales. The forward PE is only 11.

Commodity, oil and agricultural products all had a significant price increase this spring and summer as energy prices impacted profitability across the board. Many have already seen their prices crash downwards along with crude oil, and it remains to be seen whether this will continue.

While slowing with the U.S. economy, international development around the world will continue to be an engine of growth to drive production in multiple industries and there will always be a need to transport these products.

As the great leaders and businessmen of the 19th Century knew, markets can retreat, but after every retreat comes a new day of increased growth and higher market returns.

By investing like the great industrialists, we can follow their examples to great wealth. Build your fortune the same way as Vanderbilt and Buffett by investing in unloved and undervalued sectors like transportation…

Source: Follow the Great Industrialists to Incredible Wealth

Not even Warren Buffett was immune to the stock market’s rampant first-half gyrations, as Berkshire Hathaway Inc. notched its worst first half in 18 years, with the shares skidding more than 16%. But only a fool would count out the great Oracle of Omaha, who has spent the past several months restructuring his company’s portfolio and is now ready to come out swinging for the year’s second half.

As Money Morning’s Horacio Marquez noted in his most recent “Buy, Sell, or Hold” feature, Berkshire Hathaway has had a tough start for the year.

The company’s net earnings for the first half were $3.8 billion – a 33% decline from the $5.7 billion reported for the same period last year. But even though the second quarter was weak – especially by Buffett’s standards – it showed marked improvement from the first three months of the year.

Berkshire reported about $1.6 billion in unrealized losses from derivatives in the first quarter. But after warning that derivatives contracts will often “swing wildly,” the company posted $689 million in derivatives gains in the second quarter.

Berkshire’s revenue actually rose 10% to $30.09 billion for the quarter.

But that’s not enough for Buffett, who has set about restructuring his company’s holdings. In the past few months, Berkshire has reduced its investments in Anheuser Busch Cos. (NYSE:BUD) and Trane Inc., and added positions in NRG Energy Inc. (NYSE:NRG), Ingersoll-Rand Co. Ltd (NYSE:IR), and Sanofi-Aventis (ADR:SNY).

According to filings with the U.S. Securities Exchange Commission (SEC), Berkshire in June reduced its stake in Anheuser Busch to 13.85 million shares, less than half the 35.56 million shares it held as of March 31. It’s likely the company received a tidy sum for its shares, as earlier that month InBev SA (PINK: INBVF) offered $65 a share for the American icon. Buffett admits to bailing on the Bud brand before InBev raised its offer to $70 a share, but AB was trading at close to $62 a share on June 30, much higher than the $47 a share the company was valued at in late March.

Also in March, Berkshire dumped its 10.9 million shares of Trane Inc. That stake was valued at more than $500 million as of March 31.

After unloading in the spring, Buffett treated Berkshire Hathaway to a $4-billion shopping spree over the next several months. By the end of the second quarter, Berkshire’s stake in French drug maker Sanofi Aventis had shot up 317,200 shares to reach 3.9 million. Berkshire also added 5 million shares of Ingersoll-Rand, and announced new holdings in NRG Energy, the second-biggest power producer in Texas. Berkshire had 3.24 million NRG shares as of June 30.

Even more interesting, in a move that highlighted Buffett’s bullishness on railroad stocks, Berkshire doubled its stake in Union Pacific Corp. (NYSE:UNP), taking its holdings from 4.45 million shares at the end of March to 8.91 million shares as of June 30.

Last year, Buffett and Berkshire road the rails hard. Buffett made his first move on Burlington Northern Santa Fe Corp. (NYSE:BNI) last April, acquiring nearly 40 million shares – or close to 11% – of the railroad. He then moved on to snap up 10.5 million shares of Union Pacific Corp., and 6.4 million shares of Norfolk Southern Corp. (NYSE:NSC).

Later in August, Berkshire went shopping again, loading on an additional 3.3 million shares of Burlington and another 6,000 in September. But Buffett didn’t stop there: He added yet another 10,300 shares of Burlington over the two-week period ending Jan. 22, bringing Berkshire’s total stake in the company to 18.2%.

Berkshire’s second-quarter acquisitions, which were disclosed in an SEC filing last week, are only a fraction of the $3.98 billion Berkshire spent on stocks in the April-June period.

Even if Buffett bought the shares at their highest second-quarter prices, which he almost certainly did not, the total cost would only have been about $260 million. That means more than $3.5 billion went into smaller amounts of unnamed stocks the company was not required to disclose.

Where that money went is anybody’s guess, but Buffett indicated in a recent interview with CNBC that a portion of it went into one of two stocks: Wells Fargo & Co. (NYSE:WFC) or American Express Co. (NYSE:AXP).

Wells Fargo stock has plummeted 22% in the past year, while American Express is down more than 37% in that time. However there may be some clues as to which stock Buffett really believes will rebound in some earlier comments he made.

“We’ll say at American Express… they are experiencing credit deterioration and they’re experiencing it sort of in all segments,” Buffett said earlier on CNBC’s Squawk Box. “So they’re seeing the rich customers slow down in payments, slow down in purchases.

“And American Express can describe that rather than I,” he added, “but I pay a lot of attention to that sort of thing. And incidentally, it will get cured at some time in the future, but right now the situation is getting worse and I would say that I don’t see any early end to that.”

That assessment doesn’t seem particularly favorable, particularly compared with comments Buffett made with regards to Wells Fargo just a few months ago.

“Wells Fargo stock was down last year,” Buffett said, “I don’t think the intrinsic business value shrunk. In fact, I said I thought it probably increased a touch.”

Berkshire already owns considerable stakes in both companies.

Source: Buffett Reignites Berkshire Hathaway with a $4 Billion Spending Spree

I managed to pack in four barbecues (or “cookouts” to put it in American lingo) over the weekend – all pretty close to home – so not too much damage done. And with soaring gasoline and food prices contributing to a projected 3.6% rise in consumer prices this year, it might be the best way to go.

Gas prices obviously remain front-and-center of the news, so let’s check in and see how it’s affecting consumers on both sides of the Atlantic, plus an industry that is arguably getting hammered even harder.

National Average Gas Price

Following a daily march higher over the past three weeks, the current national average gas price per gallon sits at an ugly $3.93. But with gas in 11 US states already over $4 a gallon, this number is now more for headlines than anything else. Bottom line: It’s expensive!

Little wonder that AAA projected a drop in Memorial Day travelers this year – the first decline since 2002. Many have also scaled back their plans, due to rising gas prices. And MasterCard reported a 7% drop in gas sales in the week leading up to the holiday.

But it wasn’t just Americans feeling the pressure at the pump this weekend…

Truck JamLike in the US, Monday was also a holiday in Britain, with the long weekend giving Brits a similar chance to hit the road for a short break.

Trouble is, UK gas prices are 17% higher than this time last year, with diesel prices almost 30% higher. The national average is currently $1.14 a liter and $1.26 a liter respectively. In US terms, that’s about $10.16 and $11.23 per gallon.

You can see why 16% of respondents to an Automobile Association survey said they plan to use their cars less.

What bothers many Brits, though, is that about 60% of fuel costs go into the government’s coffers in taxes. And today, the nation’s truckers took their protest to the streets.

In a mass demonstration against high prices and the government’s planned 2 pence per liter fuel tax rise (set to come into effect in October, having been postponed from April), hundreds of truckers set off from various parts around the UK and conducted a “go-slow” along the motorways.

One convoy ended at London, where the truckers handed a petition to the government at Downing Street. The other convoy, starting from further afield, handed its petition to the Welsh Assembly in Cardiff because (ironically), the trip to London would have cost too much.

The underlying problem that the trucking industry faces today is certainly not exclusive to Britain, though. High fuel prices are hammering both British and American truckers. So could America see a similar backlash?

America’s Big Rigs Have Big ProblemsActually, it already has. You may remember some truckers driving their rigs to the Capitol in Washington, D.C. in early April to protest against high fuel prices and imploring Congress to provide some relief measures.

You can see why. While diesel prices are up 30% in Britain over the past year, the price has blasted 80% higher in the US – from $2.50 a gallon this time last year to $4.50 today, according to the New York Times.

When it costs $1,125 to fill up a 250-gallon fuel tank, that clearly crushes any kind of profit margin that trucking companies hope to generate.

In fact, the American Trucking Association says times are so tough today that during the first quarter, 935 companies with fleets of five trucks or more went out of business. That’s up an astonishing 143% from the 385 in Q1 2007 – and is the worst quarterly “bust rate” since 2001.

In total, 45,000 trucking vehicles have permanently pulled off America’s highways since early 2007, according to America’s Commercial Transportation Research.

The domino effect of this is far-reaching. Reduced profits can erode employee wages, decrease supplies of goods, and create more potential for failing companies. In turn, that can cause bankruptcy and dents GDP growth.

So is there a way to play these developments?

Hit The Road (The Railroad, That Is)In a desperate attempt to offset some of the costs, some trucking firms are turning to rail companies.

While trucks can only haul so much and are directly impacted by rising gasoline costs, rail companies can absorb soaring oil prices more easily, as they can haul more goods. A few of the biggest names in this area include:

Burlington Northern Sante Fe (NYSE: BNI) – a firm that Warren Buffett has invested heavily in… Union Pacific Corp (NYSE: UNP)… and CSX Corp (NYSE: CSX).

All three are also members of the Dow Jones Transportation Average (^DJT), which is a remarkable story itself…

Transports Bust The TrendRemarkably, despite the march in oil prices to over $130 a barrel, that hasn’t stopped the Dow Transports from surging, too.

This is a major reversal in the historical trend. Oil prices and the Dow Transports usually move in opposite directions – and you’d think that with fuel being the biggest expense for Transportation Index companies and high oil prices pressuring so many areas of the transportation sector, the index that represents these firms would also be under severe pressure.

Not so. The DJT is actually up 15% in 2008, and as my colleague Jim Stanton reported in his bi-weekly “Sector Watch” column last Monday (May 19), the index raced to an all-time high of 5,550.17 on the same day. Jim applied some technical analysis to the index – and how to play the next move profitably through the index’s ETF – so take a look.

With the index made up of airlines like American (NYSE: AMR), Continental (NYSE: CAL), JetBlue (Nasdaq: JBLU) and Southwest (NYSE: LUV), plus shipping companies FedEx (NYSE: FDX) and UPS (NYSE: UPS) – all of which are buckling under the weight of high oil and gas prices – economists are now hotly debating whether it’s throwing the market a curveball.

Traditionally seen as a sign of US economic strength and turnarounds, the fact that the index is soaring while consumers and the economy are struggling is a source of confusion.