January 2008 was the Australian stock markets worst month since the October crash of 1987. The ASX 200 fell 10.9% in January with companies perceived to have heavy debt loads or complex structures hit hardest. For example Centro properties group lost 32% while Centro Retail slumped 50%.

So where to now?

Transurban (tcl) was up 32 cents in January with a yield of 8.17% at a current price of $6.79. This company also has quality assets that will continue to keep it a very safe stock in these volatile times.

Compare this yield of Transurban to a rental yield on a 3-bedroom house in Sydney of 3.2%.

Thus there is a 5% greater yield for transurban with debatable less risk.

Furthermore this infrastructure stock has a group of seven toll road assets in Australia and the USA making it a diversified company, which also boasts a safe level of debt.

For these reasons I rate Transurban a Buy with a 12 month target of $9.00.

Another two stocks Realestate.Com.au Limited (REA) $6.19 and Oxiana (oxr) $3.10 are rated a Buy at current levels.

Realestate.Com.au Limited and Oxiana have both fallen back nicely in January to a price where quality stocks can increase rapidly.

EDUCATION WITH WARREN BUFFETT

Warren Buffett approach is simple, even quaint. Ignoring both macroeconomic trends and Wall Street fashions, he looks for undervalued companies with low overhead costs, high growth potential, strong market share and low price-to-earning ratios, and then waits for the rest of the world to catch up.

As often as not, Buffett's business instincts become conventional wisdom. For example Coca-Cola Co. In 1988, when Buffett started buying the global soft-drink giant, it was a Wall Street wallflower, trading at $10.96. But Buffett saw two things that were not reflected in the balance sheet: the world's strongest brand name and untapped sales potential overseas. As Coca-Cola's earnings grew, so did investor interest. In less than five years, the stock soared to $74.50. Buffett's current stake is valued at some $13 billion.

Buffett was against internet stocks he informed shareholders that he was sticking with companies like Coca-Cola and Gillette, despite the fact that both stocks had taken a beating in recent months. "I think it's much easier to predict the relative strength that Coke will have in the soft drink world than Microsoft will in the software world," Buffett said. "That's not to knock Microsoft. If I had to bet on anyone, I'd bet on Microsoft. But I don't have to bet."

That's Buffett in a nutshell. Amazingly, the world's savviest investor has sat out the entire stampede over technology stocks, backing away even from proven players like Microsoft or Hewlett-Packard. As for Internet stocks, forget it. Buffett says he won't invest in a company unless he can "see" it, unless he can imagine what its balance sheet might look like in a decade or two -- a shockingly long view.

At age 11, Warren began marking the board at his father's brokerage; that same year, he bought his first stock, three shares of Cities Service Preferred at $38 a share. The price immediately dropped to $27, but then recovered to $40, at which point the young Buffett sold -- making a $5 profit, but missing the company's subsequent rise to $200 a share. It was Buffett's first lesson in patience.

As an adolescent, he was a tireless entrepreneur. At the age of 14, with savings from his two paper routes, he spent $1,200 on 40 acres of Nebraska farmland, which he leased to a tenant farmer. But Buffett truly caught the investment bug as a senior at the University of Nebraska, when he read Benjamin Graham's "The Intelligent Investor." The bible of the so-called value investors, Graham's book advised investors to ignore the trends that sweep Wall Street and instead hunt for stocks that trade far below their actual value. He called them "cigar butts" -- companies the stock market had discarded but that still had a few "puffs" of value left in them.

n 1962, Buffett began purchasing stock in a struggling New Bedford, Mass., textile mill called Berkshire Hathaway. With a price of less than $8 a share, Berkshire was a classic cigar butt. But it turned out that this old stooge had more than a few puffs of life in it. As the U.S. textile industry withered in the face of foreign competition, Buffett began redeploying Berkshire's capital into an array of other businesses, including insurance.

It turned out to be a classic Buffett move. While some insurance companies are better investments than others, all of them are good investment vehicles. Policyholders pay premiums up front and claims are only paid out later, providing insurers with a steady stream of low-cost cash to play with. Such funds are known as "float," and soon, Berkshire was generating millions of dollars of it. As it happened, the insurance-generated cash came along just as the financial markets went into their deepest swoon since the 1930s. Buffett, always on the lookout for values, went on a shopping spree, filling his portfolio with solid companies that began to rise once the market regained its footing.

Of course, the same qualities that have made Buffett a legendary investor have played havoc with his personal life. His wife, Susan T. Buffett, accompanies him on almost all of his public appearances, serves on Berkshire's board and is one of the firm's largest shareholders. But in fact, the couple have not lived together since 1977, when Susan -- a sometime cabaret singer and passionate abortion-rights activist -- moved from Omaha to an apartment in San Francisco. Making things even weirder, it was Susan who introduced her husband to Astrid Menks, a Latvian-born waitress at the French Cafe in Omaha, who ended up moving in with Buffett and has been his companion ever since. Susan and Astrid remain friends, and the three send presents to relatives from "Warren, Susie and Astrid."

Is relations with his three children -- all of whom have had difficulties living up to their father's high standards -- have been equally unusual. His children have hardly been the typically spoiled scions of the ultra rich. When his son Howard told his father he wanted to purchase a farm, Buffett offered to help, albeit under the same exacting terms he might offer a business partner -- he told Howie he would buy the farm and rent it to him, requiring his son to fork over a percentage of his farm income and pay the taxes. Howie agreed to the terms. But even then, his father visited the farm only twice in six years. And that's far from the only example of Buffett's tightfistedness. Once, when his daughter Susie needed $20 to get her car out of the airport garage, he made her write him a check.

That same attitude characterizes Buffett's approach to philanthropy. Despite his immense personal wealth, Buffett has not been particularly charitable -- even now, late in his life, a time when many moguls, with their eyes on the history books, seem suddenly to develop an urge to share. He often is criticized as a tightwad.

Although he has three children, his wife is his sole heir, and Buffett has said that he intends for 99 percent of his money to eventually go to his foundation, which will likely become the largest endowment in the country. (Kanter : 1999).

Comments welcome.

Tony75                    www.tony75.bigblog.com.au

Kimberley Diamonds

The Diamonds of tomorrow….endless