Trains, sweets and watches - what Warren Buffett is looking for

by Graeme Wearden.

Warren Buffett, who today kicks off a whistle-stop tour of Europe, became the world's richest man thanks to a simple strategy - buying companies that he understands when they are available at a good price.

Avoiding the complicated financial techniques that caused the ongoing credit crisis, Buffett built up a $62bn (£31.68bn) fortune through a lifetime of sensible investing. Now he has Europe's family owned firms in his sights, with potential targets thought to include the confectionery firm Haribo – maker of the gummy bear. He is also rumoured to be casting his eye over the Swiss watchmaker, Swatch.

The 77-year old put his homespun values into action last month by teaming up with Mars to buy chewing gum maker Wrigley. Joking that he had been conducting an extensive taste test on Wrigley's products since he was seven, Buffett explained why he had not instead pounced on a bank savaged by the credit crunch.

"I understand a Wrigley or a Mars a whole lot better than I understand the balance sheet of some of the big banks. I know what I'm getting on this and [with] some of the large financial institutions, I really don't know what's there," he said.

This kind of no-nonsense approach to investing has won him many thousands of admirers, who flock to the annual meeting of his Berkshire Hathaway empire.

Buffett is also a big fan of Cherry Coke, downing as many as five cans a day. Typically of the man, he is also holds a large shareholding in Coca-Cola – another company whose products will always be in demand, he argues.

Back in the late 1990s, Buffett was criticised for ignoring the dotcom bubble while other investors flocked to put money into the next big thing. That now looks like one of his sager punts. Technology has little appeal to Buffett as an investment opportunity – he prefers more traditional industries, and is a particular fan of the railroad sector.

Railroads tick another Buffett box – he loves to build up stakes in industries that generate plenty of cash. Last year he kept building a stake in Burlington Northern Santa Fe, which runs one of the US's biggest rail networks.

But despite this track record the Sage of Omaha is not averse to the more exotic financial transactions, as long as he can see profit. Betting that the Brazilian currency would rise last year – it did – helped him to grow his fortune by $10bn, putting him top of the Forbes rich list.

He also loves to buy family owned firms, who he says are happier to sell to him than to a private equity firm which might want to make a quick return through a break-up.

Buffett has little time for reckless speculation, which is at its most dangerous in the boom times. Or as he puts it: "Nothing sedates rationality like large doses of effortless money."

And his visit to Europe this week fits with an earlier explanation of Berkshire Hathaway's strategy: "We attempt to be fearful when others are greedy and greedy when others are fearful."

After nine months of economic uncertainty and a credit crunch, the time for greed may have arrived.