RAILROADS are not just for toy boxes. On Tuesday, May 14, Warren Buffett, CEO of Berkshire Hathaway (BRK) revealed that the company had reported to the US Securities and Exchange Commission purchase of significant stakes in two health insurers, Well Point, the largest insurer in the US, and Sanofi-Aventis of France, as well as increases in positions in Johnson and Johnson, and three railroads, Union Pacific, Norfolk Southern and Burlington Northern. Railroads! I thought they were just about dead in the water (on land). For years when I lived in the United States, the breakeven for any railroad was considered miraculous, while a real profit almost impossible.

Realistically, one often heard far more about continual operating deficits and requests for government subsidies to remain functional. According to Mr. Buffett, what was a terrible business 30 years ago is a much better business now, and from my perspective, it appears that he is banking on continued high oil prices and increased costs for independent long-haul truckers.

There is a subtle environmental overlay in these acquisitions. Time, which has been extraordinarily generous to him, will only tell if another shrewd buy holds the real goods.

The health insurance purchases are very intriguing, given that historically, many US insurers have struggled to turn significant profits. Could this be a subliminal signal that health costs may be reaching a more controlled environment, but for who? Forty-eight million Americans today have no health insurance at all, and that number continues to rise according to several demographic organisations such as the American Association of Retired Persons (AARP).

Current holdings in BRK stand at about 75 companies, among them construction, underwear-that's-fun-to-wear, jewellery, furniture, NetJets, natural gas, utilities, insurance and reinsurance, shoes, Dairy Queen and See's Candies — for the sweet tooths among us — newspapers, banks, railroads, health insurers and small parts manufacturers.

Increasingly, his intuition for great purchases is roaming globally as BRK's 50 billion dollars in cash float looks for another large intrinsic value opportunity in price range of 5-20 billion dollars.

Warren Watchers — and there are many — have made a business from emulating his security plays. While these smaller investors may not have the billions available, a similarly weighted portfolio can be constructed and allocated. Because the share price of a company on Mr. Buffet's acquisition radar generally increase in value, regulators often hold disclosures for BRK until Mr. Buffett has finalised the purchases.

The Brown Book (last year's report had a purple cover): Each year the annual report is issued in a very basic format; no fancy pictures of powerful-looking very well fed men in expensive suits; no gorgeous graphics and commissioned photos of art collections and actions shots. Berkshire's report is so primary plain that the cover looks like the coloured construction paper we used to buy as children to make aeroplanes and paper dolls>

The nuggets within. If you have the fortitude and patience, a read through the Berkshire Hathaway Inc (BRK) Annual Report for 2006 can yield some very interesting information. It might be said that aside from the accounting information, that even as an CPA accountant is mid boggling, this summarised view of the Omaha holding company is a direct reflection of Warren Buffett's CEO observations on American economic trends and activity.

What Mr. Buffet ReadsHe is still a passionate advocate of newspaper stock. He acknowledged that the business has changed irreversibly, with the fundamentals on a slippery slope downward.

One of his first newspaper purchases was the Washington Post run by a friend of many years, Katherine Graham. She has passed away, no longer witness to the news business in a constant race and battle for eyeballs, to quote Mr. Buffett.

He has accurately predicted that these businesses will be owned in the future by non-economic buyers who may well use the power of the press for branding and influence, already demonstrated by wealthy egos n the bidding war for the Los Angeles Times and the quest by Rupert Murdoch for Dow Jones, the publisher of the Wall Street Journal.

The only thing that I have in common with the Oracle of Omaha is that I love newspapers too. It will be a sad day for me, if the WSJ becomes a tool for the dumbing down of financial news, along with purported manipulation of facts to influence one business play or another. (I have no verification of this except the eloquent letters sent to the Dow Jones ownership by their very own writers, some of whom have earned, deservedly so, Pulitzer Prizes).

The last word on the written word from Mr. Buffet is that BRK (and he) have given their word and will keep the news stock until the last gun is fired.

Investment stock BRK likes to own whole companies these days, listing more than 70 on the final page, but it still has a sizeable common stock portfolio: American Express, Coca-Cola, Conoco Philips, Moodys Corporation, PetroChina, Tesco, Wells Fargo, White Mountain Insurance (16 percent) and others with a total market value of $61 billion. He is known to drink coke every day along with the proverbial hamburger for lunch.

Asset allocation of the investments in the insurance companies is also illuminating to the small investor. Of the $121 billion held in the insurance portfolios, 50 percent is allocated to equities, 25 percent to cash and equivalents and 15 percent to fixed income (bonds). Just a rather large, balanced portfolio approach that is recommended in far smaller portions to small conservative investors everywhe

Currency plays — for several years, BRK was short on the US dollar. Mr. Buffet continues to warn about the large US trade deficits. Despite some critical comments regarding his patriotism, BRK made profits on various currency positions against the US dollar last year. He has continued to cast aspersions on overcompensated CEOs for underperformance on the job and worries about the current tendency in government to spend our future children's inheritance.

There you have. There is much more in between the 80 pages of this brown book. If you love the free market capitalist society as much as I do, studying this report is a treasure. You can truly understand the workings of insurance and reinsurance operations without culling through hundreds of pages of industry vernacular. Through it all, this amazing individual's folksy humour and passion for life shines. It should be required reading for every entry-level college student. Try it, you'll like — it's available at the www.berkshirehathaway.com web-site and it's free.

Martha Harris Myron CPA CFP is a dual citizen (Bermudian/US). She is a Senior Wealth Manager at Argus Financial Limited specializing in wealth investment advisory services for capital preservation and comprehensive financial solutions for clients considering lifestyle transitions and rewarding retirements. Confidential email can be directed to marthamyron@northrock.bm or 294-5709 CFP, CERTIFIED FINANCIAL PLANNER|0xae|, and CFP are certification marks owned in the U.S. by Certified Financial Planner Board of Standards Inc. (CFP Board) and outside the United States by Financial Planning Standards Board Ltd. (FPSB). CFP Board and FPSB permit qualified individuals to use these marks to indicate that they have met CFP Board's and/or FPSB's initial and ongoing certification requirements.

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