2009 was a year of big moves for Warren Buffett.
As we wrap up this year and set our sights on 2010, it is a good time to look back at some of the biggest plays and best lessons to take away from the Oracle of Omaha. By internalizing these actions, investors can look forward to a financially prosperous new year.
Patience Is Key
This year, Buffett proved once again that successful investing requires a strong stomach and plenty of patience. The Oracle has famously been quoted as saying that his favorite holding period is forever.
Burlington Northern Santa Fe
is a shining example of his persistence.
Unlike many of his other investments, the financier has made it clear on a number of occasions that his investment in BNI is not expected to ever see rocketing performance.
Rather, as the United States and other nations around the world regain strength, the railroad industry will see slow, albeit steady returns. Instead of the looking forward to the next few months or years, Buffett believes that this BNI is well suited to benefit
long after Buffett is gone and even into the next century.
As moments of weakness present themselves in this recovering market, having the patience to weather market volatility will prove crucial to successful investing in 2010.
Know When to Fold
Buffett has stated that his two most important rules when it comes to investing: Don't lose money, and don't forget that rule. In 2009, the investor has shown just how dire the
are when his investments fail to live up to these two rules.
Professor Buffett's most noteworthy dud in 2009 was
. Since July of this year, the investor has cut Berkshire's stake in this damaged credit ratings agency on six different occasions.
The most recent share cut occurred on Dec. 23, when the investor dumped nearly 88,000 shares. Berkshire's stake in Moody's has been cut 34% from the 48 million shares it owned at the end of June. It is likely that, by the end of 2010, Buffett's portfolio will be nearly, if not completely free of Moody's exposure.
Another big loser in Buffett's portfolio this year has been
. Not only has Buffett slashed 800 employees from the struggling firm, but he replaced the company's CEO in August in hopes of turning the firm around.
Thanks to the broad market reversal in 2009, the returns have been plentiful. However, looking to 2010, investors need to remain vigilant in their search for not only strong buys but also safe windows to exit underperforming holdings.
Take Intelligent Risks
This year, the Buffett saying, "Be fearful when others are greedy and greedy when others are fearful" was perhaps the
. In 2009, this single lesson netted the Oracle billions.
is Buffett's biggest success story of 2009. In September, the Oracle of Omaha invested $5 billion into the firm, essentially saving it from collapse. Buffett's blessing has paid off beautifully as Goldman Sachs' shares have rocketed through the second half of 2009, earning the investor billions in profit.
The company has risen from the ashes to currently hold the throne as king of Wall Street. Because Buffett had faith in the U.S.'s financial system when others were fearful, the investor has earned over $3 billion in profits. Heading into 2010, expect Buffett to rake in even more from this play.
It is important to remember that Goldman Sachs was not the only financial firm that sought the help of the Oracle. On the contrary, when the sector as a whole was faltering, a number of other big names looked to Buffett for assistance.
However, through doing a significant amount of research and homework, he found many of these firms to be inherently damaged and lacking attractive upside potential. While risky, Goldman proved to be the safest play for a rebound in the U.S. financial system.
As Buffett has shown, taking risks is essential to earning big returns. However, doing your homework is even more important. In 2010, investors will have even more opportunities for big profits. However, only by following Buffett's example and doing your homework, will you be able to weed out the winners from the losers.
-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion did not have any positions in the stocks mentioned.
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.