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Invest Like Warren Buffett, Not Warren Sapp

NEW YORK (TheStreet) -- There are the people who invest in the stock market and stick with it through good and bad. Then there are the people who invest in "things."

Legendary investor Warren Buffett has a positive outlook on the stock market, especially with the Standard & Poor's 500 index in record territory.

Buffett is especially bullish on railroads, starting with Norfolk Southern. To be pitching railroad stocks means being bullish on the American economy. "As long as more goods move from place to place in this country, rails are going to get their share," stated Buffett in a recent CNBC interview.

Buffett has become one of the richest men in history through investing in basic industries -- things he can understand, be they railroads, Coca-Cola (KO) or Wells Fargo (WFC).

However, there are those who travel a different path, or in this case gridiron.

Meet Warren Sapp.

After many years in the NFL, Warren Sapp is a Hall of Fame defensive tackle and is a pro football commentator. When he filed for bankruptcy, he listed over 200 pairs of Air Jordan sneakers as "assets." Sapp would have been much better off buying shares of Nike (NKE), which makes Air Jordans, rather than hundreds of pairs of the shoes, a less-than-liquid investment.

Buffett does prefer to buy shoe companies, as well as others that sell everyday products. His investment vehicle, Berkshire Hathaway (BRK.A), bought Dexter Shoes in 1993, a deal he later called one of his worst years later. But he did better when he owned more than three million shares of Nike.

Investing is the act of buying the future income stream of an asset. Nike pays a dividend. Air Jordan sneakers, no matter what the condition, do not. Shares of Nike stock can be sold immediately at a known price. That is hardly the case with Air Jordans, as Sapp's bankruptcy petition clearly demonstrated.

Individuals should not forsake the stock market just because it has done well. It's harder to make money drifting into collectibles or other "things" as investments. Firms like Coca-Cola have a history of increasing the dividend yearly -- the longer you hold the stock, the more you're paid. That is one of the many benefits of being a long-term investor.

Still, there are those warning against a collapse in American equities due to the length of the current bull market. One, Mark Hulbert, thinks one way to prepare for lower returns in the U.S. is to "overweight cheaper foreign stock markets" in emerging-market countries.

Well, if emerging-market nations including China and India are doing better, that means there will be massive railway traffic in the United States carrying grain and coal for export to those countries. That favors American railroads including Union Pacific (UNP) and Buffett's investment, Norfolk Southern.

So get on board with blue-chip stocks for the long term like Buffett, and stay out of bankruptcy court like Sapp.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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