Buffettology - Mary Buffett (4.5 of 5 Shares of Gillette)

Mary Buffett was married to one of Warren's sons for a time before filing for divorce. During her stay in the Warren compound she had the opportunity to see the inner workings of the Oracle of Omaha's investing strategy. In this book she outlines the core Buffet investing strategies.

The underlying theme of Buffet's time-tested strategy is value investing in bear markets. When the indexes hit bottom, you dump your money into companies that have been around for many years and aren't going anywhere. They make products that consumers will always buy and have to buy often. The best way to find these companies is by walking into any local grocery store. There you'll find names like Johnson and Johnson, Mars, Gillette, etc. Their stock prices will be down because of the overall market but they will surely rise during the economic recovery.

There is also an interesting section of the book that discusses arbitrage. This is essentially looking for rumors of potential buyout situations. When a company agrees to buy another, it will establish a buyout price per share for all available shares. Your profit will be the difference between the current share price and the buyout price. This strategy is difficult and more risky than the first. It is hard to find these buyout deals before the crowd does, and the agreements often don't go through in the end. The buyout offers do however create a great deal of volatility that day traders can exploit.