You don't need to read through Warren Buffett's entire letter to shareholders to find specific investment advice.
In my Street Talk column on Forbes.com, I compared Buffett's billion-dollar positions from 2008 to his positions a year later:
If you want to ride Buffett's coattails even with a lag, you can emulate the changes in the Berkshire portfolio by adding to your Wal-Mart ( WMT) position, reducing your Procter & Gamble ( PG) and Johnson & Johnson ( JNJ) (I'm surprised), increasing your Sanofi-Aventis ( SNY) and dumping ConocoPhillips ( COP) as fast as you can. Other copycat investments could include options on Goldman Sachs ( GS ) or General Electric ( GE), or securities, common or preferred stocks in Dow Chemical ( DOW ), Swiss Reinsurance or Wm. Wrigley Jr.Company, which was acquired by Mars Inc., a private concern. Berkshire's holdings were the result of private transactions, not publicly traded vehicles.
Buffett's moves help him avoid the worst market drops. He also misses the biggest upward swings. He had strong words in his letter for the executives and board members of the companies that failed:
. . . directors of major banks are "derelict" if they don't "insist that [their] CEO bear full responsibility for risk control. If he's incapable of handling that job, he should look for other employment. And if he fails at it -- with the government thereupon required to step in with funds or guarantees -- the financial consequences for him and the board should be severe."
That doesn't mean Buffett steered clear of derivative contracts. The complex instruments that hurt the big banks can be used carefully to control investment risk, Buffett noted. As I said on the StreetTalk blog:
In an amazing disclosure, the 79-year-old investment genius reveals that he and he alone initiates and monitors every derivatives contract on his books, except for some contracts at Berkshire subsidiaries. "If Berkshire ever gets in trouble, it will be my fault," says. "It will not be because off misjudgments made by a Risk Committee or a Chief Risk Officer."
This is fascinating. Warren Buffett is his own Risk Committee and Chief Risk Officer. He should open an academy for Wall Street derivatives traders who have no idea of what risks they have been taking.
After completing a $26 billion purchase of Burlington Northern Railroad, Buffett is down to his last $20 billion in cash. What will he do in 2010? He always finds a way to make money. You can emulate his trades, or make a direct investment in Berkshire Hathaway, which after a split is selling for about $80 a share -- the most affordable price in decades.