Warren Buffett's Berkshire Hathaway (BRK.A) released its latest 13F for the quarter ended September 30, 2007. Below is a summary:

New Stakes:

Why? Can anyone name the last time Buffett bought shares in a company on the open markets when people thought he would? Me neither. Shares of Countrywide (CFC) jumped 10% yesterday when the Wall St. Journal simply opined that he may be a buyer of parts of the company. No facts, just an opinion. How large would the premium be for Buffett if word got out he was actually buying the company or made an offer for it? That fact alone eliminates an open market purchase of the lender.

New Stakes:

0. Selling paper and cherry coke -Buffett breathed business since he was a young boy. By the time he was 20 years old in 1950, he had saved $9,800 by selling newspaper and cherry coke.

In 1988, Wall Street said Coca-Cola was a bad stock to buy. Warren Buffett thought it was a wonderful business to own. The results speak for themselves; so, let's look at the reasoning behind Warren Buffett's most famous purchase.

The Cash Cow

But while the Form 4 filing was the first glimpse afforded to the outside world about Buffett's new stake in BNI, it doesn't tell the whole story.

So, if you were him, what would you buy?

Does that imply ETFs are un-American? We've heard these rumblings from Mr. Bogle, but I'm a little surprised to see Mr. Buffett sharing similar thoughts. The advantages of ETFs over mutual funds are overwhelming. I'm surprised these distinguished gentlemen think little enough of the average investor. Discouraging investors to stay away from ETFs because they might entice trading or speculative investing is like warning people to stay away from doctors because you might get a needle in the eye. Investors don't need ETFs if they are looking for an investment to shoot themselves in the foot. There are plenty of hyped stocks and over-marketed actively managed mutual funds that would do a much better job.

How much of the process of merger and acquisition is ego driven, psychology, sentiment -- and how much of it is legitimate, intelligent strategy?

Exacerbating the stock’s weakness was the company’s announcement in early March that it would issue stock to pay for its acquisition of California Wholesale Material Supply, Inc. [CALPLY], a building materials distribution company.

In 1962 Buffett began purchasing shares of Berkshire Hathaway, then in 1969 focused all of his attention on running the company until it became one of the largest holding companies in the world. It market cap is currently $167 billion.

In his letter, Shai asks just one question:

Berkshire's most recent reported purchase was made on Thursday, April 5th, and consisted of 1,219,000 shares purchased at $81.18 each.

Upon presenting the familiar table of Berkshire's major investments in his most recent letter to shareholders, Buffett wrote:

Most of the books out there are great for picking up on the important stuff regarding the financial qualities Buffett seeks in a company - profit margins, high return on equity, low debt, hefty cash flow, etc. But there’s a problem with just about all of the information out there: It tries to distill Buffett’s investing prowess into a formula that anyone can use by plugging in numbers. But it’s far from that simple.

Unlike other books that focus on Warren Buffett's buy and hold investment style, this book takes a look at other stock market strategies Buffett uses. The author does this in a comprehensive, yet easy to read format. The best description of this book is that it takes the kind of concepts discussed in Joel Greenblatt's "You Can Be a Stock Market Genius" and examines how Buffett has for many years applied similar techniques.

Unfortunately, his argument goes off the tracks pretty quickly. He singles out three billionaires: Kirk Kerkorian, Michael Dell, and Warren Buffett. Ritholtz has a point with Michael Dell, but the same point is applicable to an awful lot of insider buying at large, public companies.

I excuse such reports, because they don't even pretend to be serious reporting – they're instant regurgitation and they look the part. In prior years, Buffett's annual letter was exempted from such "breaking news" treatment; however, due to SEC regulations this year's letter was released on Thursday instead of Saturday.

Since most investors are not going to read the entire letter themselves (although they should), they will rely on media reports to learn Mr. Buffett's thoughts. We predict that one aspect of the letter will be cited in a way that seriously misleads investors, the statement in which he uses the term "soft landing."

Berkshire Hathaway Performance
First, per-share book value increased by an amazing 18.4% in 2006 for Berkshire Hathaway (BRKA) (BRKB). Over the past 42 years, book value has grown at a rate of 21.4% compounded annually.  2006 was a great year for Berkshire Hathaway primarily because no major weather related events impacted the insurance business.  Mr. Buffett also had great things to say about Tony Nicely’s performance at managing GEICO.

While most investors measure themselves by long-term monetary returns, many of us place greater value in the craft and legwork of investing itself - researching businesses, digging into their operations and financials, predicting change, and attempting to discover unknown and undervalued companies in which a dollar can be purchased for 50 cents. To do this, we build a model/framework to evaluate companies and their stocks and hope to create a foundation for long-term success. However, we also need to maintain a level of flexibility and self-evaluation, constantly revising the tools we use and assumptions we make, allowing that framework to evolve. Fortunately, Warren Buffett provides one of the best free, comprehensive tool kits to build our model and help guide its evolution - his annual letters.

I wanted to briefly discuss some themes and my own takeaways from this year's release: