The Globe and Mail

Warren Buffett has accumulated great wealth by following some simple rules.

Mr. Buffett advises investors to “buy wonderful companies at fair prices instead of fair companies at wonderful prices.” He also suggests that investors be aware that “price is what you pay, value is what you get.” And finally he has been quoted that “our favourite holding period is forever.”

Mr. Buffett's recent acquisition of the stake in Burlington Northern Santa Fe BNI-N he didn't already own is a prime example of paying a fair price for a wonderful company. The $100 (U.S.) a share offer was a 30-per-cent premium to the market suggesting that in his evaluative process there is greater value to surface over an extended investment horizon. Burlington Northern is a huge hauler of coal and by extension it would be worth looking at what the longer term holds for anthracite.

Mr. Buffett's largest holding is in Coca Cola Co. KO-N of which he owns 200 million shares representing 8.63 per cent of the company, valued at $10.7-billion. Mr. Buffett bought his first shares of Coca Cola in 1988 investing $1-billion in the company. Not only has there been a healthy return on his original investment over the last 21 years but he is currently earning $270-million a year in dividends.

The three-year chart provides a look at the kind of company that has the ability to rebound from steep selling pressure under volatile market conditions.

Mr. Buffett's most recent regulatory filing reported that the Oracle of Omaha had added Republic Services Inc. RSG-N to his holdings. Republic Services is a solid waste management company which has now been added to the watch lists of many investors and money managers as they follow in the steps of the giant.

What we can see is that there is resistance at $28 that has to be overcome. But if your investment horizon is forever then I would say it's not a stretch to think that eventually man's propensity to create solid waste will drive greater profits to the bottom line of Republic Services.

Even the greatest investors have some dogs in their portfolios and so is the case with Mr. Buffett. Moody's Corp. MCO-N, which is the parent company of rating agency Moody's Investors Service, would have to be seen as a mutt. The rating agency sector has been under greater scrutiny because of its role in the catastrophic U.S. mortgage fraud that has roiled the world capital markets since the summer of 2007.

Moody's and other rating agencies gave mortgage-backed securities stuffed with subprime mortgages AAA ratings. Awarding the highest credit rating to toxic assets has called into question the conflict of interest that exists when the rating agency is paid by the issuer of the financial instrument.

The future for Moody's is in the hands of the regulators who have their hands full at the moment. But eventually they will have to restore confidence in the ratings process and that will entail greater regulation – which in the end will compresses profit margins.

Another holding that is being tossed about on the waves of change is The Washington Post Co. WPO-N , which operates the newspaper, some cable assets and an education division.

Clearly the evaporation of advertising revenue for the Washington Post and other newspapers has contributed to the downdraft in the stock. There has also been some weakness in the education unit.

Mr. Buffett has been quoted as saying that the business model for newspapers is broken and he might be holding on to The Washington Post Co. to see if there is a solution to the current problem.

Mr. Buffett has used some simple rules to make himself the second richest man in the world, but let's not forget that you would have to be that rich to hold on to your losers this long.

Happy Capitalism!