Stockpickr: Four Ways to Win Like Buffett

Another good Buffett friend to keep an eye on is Charlie Munger, Buffett's vice chairman at Berkshire who has worked with him for over 40 years. Buffett first refers to Munger (although not by name) in a letter to investors in 1965 when he refers to a smart investor who helped him to decide to put some money in American Express(AXP Quote).

Although Munger's positions are hard to separate from Buffett's because Berkshire Hathaway is the parent company of Munger's investment vehicle, Wesco, we have set up a portfolio for Munger's top positions or other companies he's involved in.

It's also worthwhile to watch Buffett friend and Berkshire board member Bill Gates -- Gates' personal portfolio is heavily influenced by Buffett.

4. You need to know how to arbitrage.

Buffett set up his initial partnership in the 1950s, and then all through the '60s he made a large amount of his profits each year from short-term arbitrage situations. Most people think of Buffett as a pure buy-and-hold investor, but this was definitely not true when he first started out.

As recently as 1997, Buffett stated that if he had just $1 million to invest (as opposed to $50 billion) he could still make returns of 50% per year. There's been some discussion at Stockpickr about how he would do this, but I believe the basic technique he would use is arbitrage. Arbitrage occurs when there are two potential prices for a single asset and you attempt to buy at the lower price and sell at the higher price.