Snippet from CaptainJJack on Warren Buffet:
As a necessary condition, he looks for integrity and a focus on the long term shareholder. If a company falters this condition in any way, at any time, it's a goner.
After that, he focuses on the businesses. He likes businesses with strong cash flow, and he LOVES businesses with a history of strong cash flow and relatively low (compared to revenue) ongoing fixed investments. Look at his Coca Cola, American Express, Sees Candies, Wells Fargo, and Proctor and Gamble.
Historically, he has shied away from businesses that require a high fixed investment, especially in intellectual capital such as technology (as far as I know he has never owned a share of Microsoft even though I believe Gates is on his Board and is a good friend) and drug stocks. He claims that he just doesn't understand well enough what makes these businesses run.
This makes his new investments in drug stocks somewhat puzzling, although, at least with J&J, you could make the argument that it is a P&G look alike in the health care space.
BNI was also puzzling until I figured out how railroads were regulated, and I expect that Buffet will keep this stock as long as they are virtually exempt from antitrust laws even though as a business with high capital costs, they look more like airline stocks than anything Buffet would own.
As for COP, I am guessing he got into this using the standard developed by Graham that suggests for high capital intensive stocks in a rising market, you always want to own the second tier, less efficient companies. When the price of commodities fell, and not expected to rise soon, Buffet had no reason to own Conoco.