AMERICAN investment guru Warren Buffet has done it again. This month, he reported that his Berkshire Hathaway investment company had recorded average annual growth of 22.2%. By backing his own judgment, the second richest man in America has turned $70,000 in start-up capital into a $36 billion fortune.

Buffet, of course, has his fans, among them Nigel Poynton, portfolio manager at NCB Stockbrokers, who says: “Warren Buffet is one individual who I don’t mind giving the benefit of the doubt.”

Buffet’s personal stock rose again when he steered clear of dotcom in favour of simple, well-managed businesses, particularly brick, carpet and paint companies. Few investors have the resources Buffet can deploy in the markets, but a budget option will let private players put their money into Berkshire Hathaway, which is traded on the New York stock exchange.

Billy Hanley, fund manager at Dolmen Butler Briscoe, believes the stock is a good buy because the company is performing well thanks to Buffet’s successful, transparent and simple strategy. “Buffet looks for companies with a long-term view rather than what is fashionable at the moment,” he says. “He emphasises fundamental strength, growth and profit.”

The $112 billion holding company is known for its large “semi-permanent” minority holdings in a handful of America’s largest companies, such as American Express, Coca-Cola and Gillette. A $10,000 investment in Berkshire Hathaway stock in 1965 would be worth $50m today. If the same money had been invested in the Standard & Poor’s 500, it would be worth $500,000.

Berkshire Hathaway’s stock is divided: Class A shares are largely inaccessible to small investors as they cost $68,100; and Class B shares, which cost $2,266 each, don’t carry the same voting rights.

David Braverman, senior investment officer at Standard & Poor’s, says: “For the year ended December 2002, the value of Class A shares fell 3.77% and Class B stock dropped by 4.04%. This compares with a decline of 22.1% for the Standard & Poor’s 500.”

Braverman says Berkshire Hathaway stock is ideal for investors with a long-term outlook. “They should not be income-oriented because the stock does not produce dividends and they should view their investment as a long-term one with good returns.”

Poynton says the company recently announced a 12-fold increase in its fourth-quarter earnings. “This surge in profits was driven by the huge increase in insurance rates post-September 11,” he says. “Berkshire Hathaway continues to pursue an insurance marketing strategy based on its extraordinary levels of capital and the strength of its balance sheet. The non-insurance operations have also performed strongly while prudent investment in high-yield, high-risk bonds has issued strong returns.”

But while the share price performed relatively well in 2002, it has fallen by about 6.5% on a year-to-date basis, suffering from equity market malaise and the poor performance of insurance-related shares, says Poynton. “There are concerns for the future,” he says. “Some investors believe General Re (a Berkshire Hathaway subsidiary) will announce more losses from under-priced policies.”

Poynton says there is also the question of how Buffet will spend the $10 billion cash pile the company has built recently: “There aren’t too many readily digestible acquisitions in the $5 billion to $10 billion range. This could slow Berkshire Hathaway’s future growth rate.”

There are some concerns about Buffet’s age. The investment guru is 72 and his top six managers at Berkshire Hathaway are over 75, but Hanley says a younger tier of strong managers waits in the wings. “I have every confidence in the younger generation of managers at Berkshire Hathaway,” he says. “Buffet’s age should not be a deciding factor on whether to buy the stock.”

European investors should be aware of the dangers posed by investing in dollar assets, according to John Beggs, chief economist, AIB Group Treasury. “There is concern about the strength of the dollar,” he says. “It has weakened substantially over the past six months and now stands at $1.06 against the euro and so anybody investing in an American asset is taking a considerable currency risk.”

Many commentators believe the dollar has further to fall. Beggs also said that some believe that the US market is overvalued and that stocks may fall further before they recover. Investors should consider shares only as part of a diversified portfolio.