Berkshire Hathaway's Warren Buffet is a disciple of the teachings of Benjamin Graham and David Dodd, who made their fortunes by buying businesses that were selling for less than the value of their working capital (current assets minus current liabilities). The pair developed a Net Current Asset Value (NCAV) model to determine if a company was worth its market price. Their formula subtracts all liabilities, including short-term debt and preferred stock, from a company's current asset balance. By buying stocks trading below their NCAV, investors would be paying nothing for a firm's assets. They also wanted to buy only large firms with diverse customer bases and significant revenue because small companies typically have more trouble dealing with economic downturns. They were insistent about investing only in companies that had long histories of paying dividends, and looked for companies with steady, rising earnings that would lead to improved share prices, targeting companies with price/earnings ratios that were below their historical averages.

For this issue, we're featuring companies in which Warren Buffet has large stakes. "The Oracle of Omaha" prefers to hold his favorite stocks for the long term, but there are only 15-20 major holdings in his portfolio. Most recently, Berkshire bought all the shares of Burlington...

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