The world's richest man is a numbers guy with a winning way with words.
Many investors have tried to mimic Warren Buffett, but there's still only one Sage of Omaha, and no one else with his long-term track record.
Attempts to locate stocks he'd buy using share screeners often throws up companies you couldn't imagine him ever putting money into. I don't want to decry such approaches -- the investing cat can be skinned in a dozen different ways -- but this time let's listen to Warren Buffett rather than the numbers.
Sadly, I haven't secured an exclusive interview with the Berkshire Hathaway billionaire. But no worries -- Buffett is the most widely quoted investor ever.
Here's what some of his more famous quotes suggest he might buy in Britain:
Smoking in the shade
1. "I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty."
In British American Tobacco (LSE: BATS), the UK boasts a true global giant -- second only to Philip Morris in supplying cigarettes. With the shares on a P/E of 12 and offering a 5.4% dividend yield, Buffett would surely buy.
2. "Someone's sitting in the shade today because someone planted a tree a long time ago."
Buffett is talking metaphorically of course, but investing in Asian Citrus (LSE: ACHL) would turn his philosophy into action -- via orange juice. The Chinese company is the largest orange plantation owner in the world's most populous nation.
Excitement is your enemy
3. "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 when others are fearful."
Man Group (LSE: EMG) is a giant in the troubled hedge fund business. You remember hedge funds -- the fabled vehicles everyone wanted a piece of up until the credit crunch brought them crashing to earth? Greed has turned to fear -- exactly the time to load up on shunned Man, which should recover strongly with the market.
4. "We never want to count on the kindness of strangers in order to meet tomorrow's obligations. When forced to choose, I will not trade even a night's sleep for the chance of extra profits."
The state-assisted banks Royal Bank of Scotland (LSE: RBS) and Lloyds Banking Group (LSE: LLOY) look cheap right now. But the fate of those companies is not entirely their own, with the Tories talking about breaking them up and the EU querying the government's assistance. In contrast, Standard Chartered (LSE: STAN) has negotiated the credit crisis without aid, and its Asian-focussed business looks set to prosper free of political meddling.
Buy good stuff when it's cheap
5. "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."
Marks & Spencer (LSE: MKS) looks fairly-priced to me, but Buffett might still swoop to secure its excellent brand and wonderful High Street locations for half the price of two years ago. Good socks, too.
6. "It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."
Buffet would have field day in today's marked down UK market, with micro-caps trading at less than their cash balances and small caps until recently priced for meltdown. The Rights and Issues Investment Trust (LSE: RIII) is a tiny investment trust with a fabulous track record of investing in small companies -- though Warren would surely try to 'chisel' into the hideously wide spread.
Buy quality for the long term
7. "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."
If I had to buy one British share to lock away for a decade, I'd pick Tesco (LSE: TSCO). Its class-spanning retail mix, excellent management, money-spinning UK sites and international diversification as well as its property backing offers unrivalled security – debt is the only worry. Other shares may do better over ten years, but few look as near-certain to be earning substantially higher revenues.
8. "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
I'm following the spirit of the quote in suggesting that the man who built his fortune out of credit cards, candy bars and Coke and who shunned tech stocks might consider Autonomy (LSE: AU). But as I wrote recently Autonomy is a fantastic share that very seldom disappoints. On a P/E of around 20 it hardly looks cheap, but historically that's a fairly modest rating. If it can grow earnings over the next five years like the past five, Autonomy is a bargain.
Keep it simple
9. "I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."
Cadbury (LSE: CBRY) is a classic Buffett company -- great consumer-focussed brands and a simple business model. In fact, like Tesco it's a company he has bought before. At 548p the shares are well below their peak, and analysts at Nomura estimate bidders would pay 800p a share. The rock solid 3.5% dividend yield will help sweeten the waiting.
10. "I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will."
My final quote of Buffett's is typically cited as a reason to favour the simplicity of company A over the complexity of company B. But if all companies are doomed to be run by idiots, then today's winners may just be benefiting from temporary great leadership, while losers may recover with a new team. Buy them all with an iShares FTSE 100 tracker (LSE: ISF) and settle for the market return instead.
More from Owain Bennallack:
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> Owain owns shares in Man Group, Lloyds, Standard Chartered, Tesco, the iShares FTSE 100 tracker and the Rights and Issues Trust.
