3 Stocks Warren Buffett is Buying NOW How does a +360,000% gain sound? That figure may seem fanciful, but believe it or not, that's exactly how much Berkshire Hathaway's (NYSE: BRK-B) book value has increased since Warren Buffett assumed control of the firm back in 1965. However, when it comes to Berkshire Hathaway's portfolio, everyone wants to know just one thing: What is Buffett buying now? In today's report, we'll not only shed some light on the "Oracle of Omaha's" latest moves, we'll provide a detailed look at three stocks that have been at the top of Warren Buffett's shopping list recently.

(1.) Read Between the Lines

Considering the phenomenal investment returns that Warren Buffett has racked up during his extraordinary career, it's not surprising that literally hundreds of articles, books, and even web sites have cropped up attempting to dissect and study his every move. Yet, while it is certainly worthwhile to spend some time learning Buffett's proven investment methodology, most of these articles rehash the same tired arguments for the same companies.

At this point, nearly everyone is familiar with longtime Berkshire holdings like Coca-Cola (NYSE: KO) and Washington Post (NYSE: WPO) -- fine companies, to be sure, but ones that are also arguably past their prime. Even Buffett has urged investors to temper their expectations for these stocks:

"Expect no miracles from our equity portfolio. Though we own major interests in a number of strong, highly-profitable businesses, they are not selling at anything like bargain prices. As a group, they may double in value in ten years. The likelihood is that their per-share earnings, in aggregate, will grow 6-8% per year over the decade and that their stock prices will more or less match that growth."

Yet, while Buffett is expecting only modest returns from most of Berkshire's older holdings, that isn't necessarily true of his latest purchases. As a notoriously selective investor, Buffett seldom takes serious interest in a new investment opportunity -- one reason why Berkshire is sitting on tens of billions of dollar in cash. Therefore, when he does finally pull the trigger on a stock, you can bet he has done his homework and is aiming for much more than a mediocre +6% annual gain.

Clearly, those looking to cash in on Buffett's almost legendary investing acumen should give much more credence to today's decisions than those made ten or twenty years ago -- when Berkshire goes shopping, the rest of the world takes notice. And to see what Buffett is up to now, there's no better place to start than with Berkshire Hathaway's latest annual report.

Over the years, these reports have cultivated a huge following, and those interested in reading the accumulated wit, wisdom, and candor of Warren Buffett will find no better source. Unlike the dry accounts of many other firms, Berkshire's reports are a rich canvas painted with Buffett's sage market commentary and humorous anecdotes. Of course, while these remarks make for fascinating reading, they can also yield important clues to those who read between the lines.

However, even for someone as quotable as Buffett, actions sometimes speak louder than words. Fortunately, thanks in part to the Securities Act of 1934, we can also get a much closer look at specific business transactions -- at least on a delayed basis. Specifically, institutional managers with more than $100 million in assets must disclose their portfolio dealings on a quarterly basis by filing Form 13-F with the Securities and Exchange Commission (SEC). If the annual report provides much of the color commentary, then this form gives us the detailed "play-by-play."

Combined, these two treasure troves of information provide a great deal of valuable insight, revealing not only what Buffett is thinking, but also what he is buying now.

(2.)  Follow the Leader

To catch up on Buffett's latest moves, we begin by pouring over last quarter's Form 13-F. Right away, we quickly notice that Berkshire has been trimming back positions in some holdings. He's also completely eliminated its stake in several others, including Pier 1 (NYSE: PIR). The struggling home furnishings retailer has been unable to turn things around in recent years, and its shares have plummeted. Fortunately, misfires like that have been exceedingly rare for Buffett and cohorts Charlie Munger and Lou Simpson (both highly accomplished investors in their own right).

In fact, since Buffett took control of Berkshire Hathaway in 1965, the firm's book value has climbed from $19 per share to around $70,000 per share, for an amazing compounded annual growth rate (CAGR) of +21.4% -- more than double the +10.4% return provided by the broader market. On a cumulative basis, that works out to a staggering gain of +361,156% -- more than 50 times the growth of the S&P.

Of course, while that long-term track record is nothing short of amazing, we are much more concerned with what Buffett is doing with Berkshire's capital right now. And according to the firm's annual report, it is clear that he continues to funnel less of the firm's enormous assets into marketable securities and more into acquiring operating businesses.

Perhaps the biggest was Buffett's $4 billion acquisition of ISCAR, an Israeli maker of metal-cutting tools. He's also completed a number of other private purchases recently, including PacifiCorp, Business Wire, and Applied Underwriters. These are classic Buffett businesses, with steady cash flows, sustainable competitive advantages, and extremely bright and talented managers. However, while the purchases of these private companies will likely benefit Berkshire Hathaway and its shareholders, they don't give everyday investors like you and me much to go on.

Fortunately, Berkshire's annual report has quite a bit more to say, including some very "actionable" advice. For example, Berkshire has raked in $2.2 billion in profits from direct foreign currency forward contracts over the past four years, mostly on the euro, Canadian dollar, and British pound. Going forward, Buffett has outlined plans to find "other ways to gain foreign currency exposure, such as the ownership of foreign equities or of U.S. stocks with major earnings abroad."

Though Buffett can be cryptic at times, this recommendation is crystal clear: boost your exposure to foreign stocks, as well as domestic companies with overseas operations.

Buffett sees a number of advantages overseas. For starters, favorable valuation levels in many foreign exchanges have not escaped his attention. Furthermore, the precipitous slide of the U.S. dollar has also factored into his decision. To back up his assertion that the greenback will continue to weaken, Buffett has provided a number of thought-provoking points.

First, the U.S. trade deficit reached record levels last year, as we imported about $760 billion more than we exported -- that's equal to about 6% of our nation's annual GDP.

At the same time, over-consumption turned the nation's "investment income account" negative last year for the first time since 1915. In other words, foreign depositors and investors now earn more on their U.S. investments than Americans do on their foreign securities. Although somewhat complex, this situation further damages the dollar's credibility.

Given Buffett's bold statements, investors might want to consider ratcheting up their international exposure or giving added preference to domestic firms that generate a healthy portion of their operating income overseas. And based on everything we've seen and heard in recent months, we think Buffett is sending a clear message that the following three companies in particular deserve a closer look.