MONEY: Be your own Warren Buffett

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The Independent Online
The Motley Fool started as an irreverent investment newsletter and has grown to become America's most popular personal finance and investment website. Anyone who follows its philosophy is called a "Foolish investor".

What's Warren Buffett up to? For those who don't know who he is, Mr Buffett is the world's greatest stock-market investor. Now aged 69, his self-made wealth puts him well and truly in the billionaire class. Only relatively recently has Microsoft head honcho Bill Gates passed him in the wealth stakes, courtesy of the supercharged share price of the company he founded.

Mr Buffett has made his fortune largely through investing in great companies. In simple terms, he looks to buy shares at attractive prices and then hangs on to them. There's no rocket science to what he does, and every investor can copy his investment style and philosophy. Despite his unrivalled record, few have taken his lead, especially unit trust managers, 90 per cent of whom underperform the market average. Is it any wonder that passive index-tracking funds are becoming more and more popular?

Mr Buffett made a flying trip to the UK this week, spending a whole six hours in the country. I guess that didn't give him time to visit the Tate Gallery or the Lake District. He was here promoting his Berkshire Hathaway company's latest fully-owned subsidiary - NetJets. That service sells fractional shares of jets, and then operates the fleet for its many owners.

NetJets is a service that only business people (paid for by shareholders, never forget that) or very rich individuals could afford to use. Imagine what it would be like to have, on demand, a jet plane waiting for you at the local airport, and having it transport you to anywhere in the US or Europe.

While in the UK, Mr Buffett was uncharacteristically forthcoming. He rarely gives interviews and rarely gives any clues as to his next stock market foray. Normally, the world has to wait for his annual chairman's letter to Berkshire Hathaway shareholders to get an insight into the great man's thinking.

Yet this week, he was interviewed on BBC radio, and also gave journalists a clue as to his next stock market investment. To the amazement of most observers, he said that he was looking to build a stake in a British company.

One report said he was looking to invest between pounds 1bn and pounds 15bn, although the latter figure looks far too high. The news, however, immediately set off the great Buffett hunt - guess the company that Warren's interested in. Wednesday's rumours included Marks & Spencer and Cadbury Schweppes. What do you think?

As world markets again hit new highs this week, the last part of Mr Buffett's equation is proving the most difficult. On radio, he said: "If the market were to go down significantly, that would benefit us, because we have money to invest and we would love to buy more of wonderful businesses at cheaper prices."

You may think it odd that a person who has made his fortune by investing in the stock market wants it to fall. In fact, Mr Buffett still has much of his wealth tied up in the market, so any correction would see his net worth slide. However, he is not concerned. Two sentences in his 1997 chairman's letter sum up his thinking on this matter: "Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."

He can say this because he is a long-term investor. He profits by making large investments when the shares in his target companies are at irrationally low levels. Once he has made his purchase, at an attractive price, he can then sit back and let the miracle of compound interest do its work. Rather than frenetically trying to predict and then blindly copy Mr Buffett's British buy, Fools should instead learn from his investment philosophy. Billions of dollars in the bank says he must be doing something right.

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The first five correct answers out of the hat win a super de luxe black Fool baseball cap.

Mobile phone operator One2One slashed its prices this week. Some tariffs are now cheaper than BT's. Which British-based company owns the brand?

n Answers to: UKColumn@ or snail mail to Foolish Trivia Quiz, Independent on Sunday, 1 Canada Square, London E14 5DL.

Last week's answer: Kvaerner


Sunderland Football Club secured their promotion to the Premiership on Tuesday night. I had a look at the share price on Wednesday and it had gone down 45p. This doesn't make sense. Could you please explain?

AS, Newcastle

Shares sometimes rise in expectation of good results, and that's particularly true of football clubs. But when the numbers are finally released, or the decisive game is played, the share price often falls because the market is looking ahead again. It had known for some time that Sunderland were likely to regain their position in the Premiership, and that had been factored into the price.

Once promotion was secure, the market started worrying about Sunderland's future - more expensive players, the fight to stay in the Premiership - hence the drop in share price.

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Send us your smartest or dumbest investment story. If we publish it, you'll get a free copy of the `Motley Fool UK Investment Guide'. E-mail to UKColumn or snail mail to Motley Fool, The Independent on Sunday, 1 Canada Square, London E14 5DL.

David Brown - a boring name, the unexciting engineering sector, a recipe for neglect by fund managers, and an undervalued share price. Yet it didn't take much research (a read of the company report, a chat with a friend working for a competitor) to find out that it had a reputation for quality and leading market positions worldwide. When share price was 170p, dividends were yielding more than my building society account's interest, and return was even better when a bid of 260p came along.

SM, Huddersfield

Fool responds: It is always great when homework turns up a winner. Stock market investing requires a little work, but the rewards can be well worth it.