NEW YORK (TheStreet) -- "Be fearful when others are greedy, and be greedy when others are fearful."
In 2011, Warren Buffett's adherence to this belief drove him to invest in some of the most disliked and troublesome companies and industries out there. Now, as we progress into the new year, some of these risky moves appear to be showing signs of promise.
Historically, January has been viewed as an optimistic month for the equity markets. Living up to this expectation, the benchmark S&P 500 has gotten off to its strongest start in 25 years. The upward action has resulted in an exciting shift in relative strength.
Defensive market corners like utilities and consumer staples that led the way as we slogged through the tumultuous closing months of 2011 have been usurped by some of last year's biggest laggards. On a year-to-date basis, materials, financials, and industrials are among the top performing market sectors.A number of the most severely battered industries have seen dramatic turnarounds as well. Solar energy stocks, for example, have staged an impressive rally during the opening weeks of the year, pushing the Guggenheim Solar ETF (TAN) to approximately 30% gains. Short-term market fluctuations likely mean little to Warren Buffett. However, given his empire's growing exposure to solar energy, this staggering recovery must be encouraging. In 2011, Berkshire Hathaway (BRK.A) took major stakes in the solar sector, even as clouds remained gathered over the industry and funds like TAN were skidding to all-time lows. In early December, for example, Berkshire branch, MidAmerican Energy Holdings, announced that it had purchased the southern California-based Topaz Solar Farm Project from First Solar (FSLR). The 550-megawatt project, which is expected to be completed in 2015, is reportedly valued at $2 billion. Days following the Topaz deal, Buffett continued his shopping spree, buying a 49% stake in the Arizona-based Agua Caliente solar project, a venture valued at $1.8 billion. Not surprising given the dismal performance of solar stocks in 2011, Buffett's heavy bets on the industry were greeted with skepticism. In an article written at the time of Berkshire's Topaz announcement, I expressed my concerns, noting that while the investor's actions could inject some life into the floundering industry, investors should remain wary of following his lead.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV