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Five Rules for Buying Stocks

2 - Buy Stocks Great Investors Own

Of course, there's a pitfall to relying on personal tastes alone. It's always valuable to have an outside perspective on your stocks to make sure you're on the right track. And if you want a second opinion, why not go right to the top and pick the brains of the best traders on Wall Street?

There's a reason Warren Buffett is a bit of a rock star to individual investors - because his trading strategies and ways to invest money seem almost superhuman. Buffett's Berkshire Hathaway (BRK) continually makes timely and very profitable investments.

In March Berkshire showed its stuff yet again in a powerful earnings report as year-over-year results improved, and the stock's book value was up nearly 20%.

So how can individual investors enjoy similar success? Simple: Buy what Buffett buys.

While it may be impossible to reproduce Warren Buffett's investment strategy and highly unlikely you'll ever get the chance to pick his brain for stock picks one-on-one, many of Warren Buffett's investments are public record.

Berkshire Hathaway must report its holdings quarterly -- investments in equity securities are a regular feature of BRK holdings. And any stock that sees an influx of cash from Warren Buffett and company often can't keep it a secret even if it wanted to due to the insatiable appetite for all things Buffett.

Take Wells Fargo (WFC - Get Report), a longtime member of Berkshire's portfolio. As of the latest quarter Buffett and company owned roughly 319.5 million shares. That's up from 313.3 million in the third quarter of 2009, 302 million shares in the second quarter of 2009 and 290 million in the first quarter of 2009.

As for WFC stock performance? The company is up about 240% from the March 2009 lows, and is up 8.5% year to date in 2010 despite a downtrend for the broader market.

There is, of course, a danger to groupthink -- and even Warren Buffett gets it wrong sometimes. But as the saying goes, "If you can't beat 'em, join 'em."

It's worth noting that while Buffett may be America's favorite investor, there are a host of others with investment strategies worth watching. John Bogle, founder of the Vanguard group and creator of the first S&P 500 index fund, is one. Hedge fund managers Julian Robertson of Tiger Management Corp. is another, famously turning $8 million in 1980 into over $8 billion in the late 1990s. Michael Steinhardt, George Soros, Peter Lynch and Carl Icahn are other big names in the pantheon of Wall Street investment icons.

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