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Warren Buffett: The Year in Review

Don Dion |Analyst
Friday, 23 Dec 2011 | 2:12 PM ET

This year was busy for billionaire investor Warren Buffett.

Warren Buffett
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Warren Buffett

Here are a few of the most closely followed, Buffett-related topics that have been in focus over the past 12 months.

Acquisitions

At the start of the year, in his annual letter to Berkshire Hathaway shareholders, Warren Buffett took time to focus on the company's future acquisition prospects. Likening his firm's massive cash pile to a loaded elephant gun, the investor spent the past year on the prowl, searching for attractive opportunities around the globe.

Overall, Buffett's safari appeared successful. Some of his recent trophies, however, have come as a big surprise.

Although it was refreshing for investors anxious to see some Berkshire cash come off the sidelines, Buffett's first big ticket purchase of the year was not overly surprising.

Valued at $9 billion, chemical maker, Lubrizol makes for a strong compliment to the current Berkshire Hathaway portfolio. The firm is responsible for products used extensively across a number of sectors in which the investor has traditionally shown interest.

Following the Lubrizol purchase it was also announced that Berkshire Hathaway would buy up the remaining shares of Wesco Financial. Prior to this deal, Wesco and Berkshire had already enjoyed strong ties; the California-based firm is chaired by Buffett's second-in-command, Charlie Munger.

During the latter half of the year, however, Buffett's buying habits got more interesting.

Marking a dramatic shift from his previous investing habits, Buffett followers learned that the famous technophobe had purchased a more-than $10 billion stake in InternationalBusiness Machines.

IBM was just one of the companies the investor took interest in during his staggering third quarter buying frenzy, however.

Analysts note that during the three month period ending Sept. 30, the renowned investor put nearly $24 billion to work. This was his largest quarterly cash expenditure in 15 years.

With his most recent decisions to purchase the Omaha World-Herald newspaper, and increase his exposure to solar energy, it is clear that Buffett is not ready to hang up his firearm just yet.

Surprises

A handful of other, more unconventional business decisions helped keep Warren Buffett in the spotlight throughout the year.

In August, Buffett stepped in to provide struggling Bank of America with a $5 billion cash injection.

This is not the first time that the investor has played hero; in 2008, he donned his cape and provided a similar cash infusion to Goldman Sachs and General Electric .

According to the most recent deal, in return for his blessing, Bank of America would sell Buffett preferred shares boasting a substantial 6 percent dividend. In addition, the investor would receive warrants to purchase 700 million common shares at a $7.14 strike price. These warrants will expire in 10 years.

Buffett's 2008 transactions played a big role in preventing Goldman and GE from collapse. B of A has continued to flounder in the months following news of Buffett's deal. Looking ahead, however, it will be interesting to see if the firm can turn itself around.

The investor confounded investors soon after with news that he was preparing to buy back Berkshire A and Berkshire B shares. This is an unprecedented move for the investor who had never before taken such an action while at the helm of Berkshire Hathaway.

Initially following this news, emotions were mixed. Some expressed concerns that this buyback program was a sign that the famed investor had officially run out of ideas.

Others, however, saw this as a signal that the company was undervalued. Berkshire appears to be siding with the latter.

In a statement issued that week, the firm expressed confidence that the company's businesses were worth more than the price at which they planned to buy back shares.

Succession

This year also brought several shakeups for Berkshire Hathaway's leadership.

In the opening months, investors were blindsided by news that David Sokol had abruptly resigned from his post.

Initially, Sokol insisted that his decision was based on his desire to focus on his family's finances and his own philanthropic efforts.

However, controversy quickly took hold as media outlets discovered that he had made some questionable trades leading up to Berkshire Hathaway's Lubrizol acquisition. A Berkshire Hathaway committee put in charge of reviewing the events eventually deemed that Sokol's actions were in violation of the company's code of ethics.

Aside from leaving many to question the ethics of Buffett's hands-off approach to leadership, Sokol's departure also reopened discussion over Buffett's eventual plan for succession.

Given his success at the helm of subsidiaries including MidAmerican and NetJets, many pegged Sokol as the likely heir to the Berkshire throne.

While, in the past, the octogenarian investor has been coy regarding the plans for post-Buffett Berkshire Hathaway, in the past year, a great deal has been learned as to what can be expected.

In the second half of the year, Buffett welcomed Ted Weschler into Berkshire's inner circle. Like the 2010 hire, Todd Combs, Weschler originally hailed from the hedge fund industry.

Together, the team of Combs, Weschler and potentially one more individual will share the responsibility of managing the firm's legendary investment portfolio.

Buffett also announced that his eldest son, Howard Buffett, would take over as non-executive chairman of Berkshire Hathaway upon the investor's departure.

In this role, the younger Buffett would be responsible for maintaining the Nebraska-based firm's culture. Howard will not be involved in day-to-day business decisions.

Taxes

While much of the Buffett-related news in 2011 focused on his company and his investing decisions, the charismatic businessman also managed to thrust himself into the middle of the ongoing political showdown over taxes.

During the waning weeks of summer, the billionaire investor reprised his role as a New York Times op-ed contributor with a piece entitled, "Stop Coddling the Super-Rich." In this widely-read missive, Buffett took aim at Congress, urging law makers to take action and raise taxes on the wealthiest Americans.

This is not the first time the investor has been a vocal advocate for raising taxes on the nation's mega-rich. Years ago, Buffett famously noted that he was taxed at a lower tax rate than his secretary.

Buffett's commentary appears to have struck a nerve in Washington. In the weeks following the release of the article, President Obama unveiled his deficit reduction plan.

Included within this plan was a measure calling for an increase to the minimum tax rate for taxpayers in the highest income bracket.

In what appeared to be an effort to boost its appeal, the proposal was deemed the, "Buffett Rule." Not everyone is on board with Buffett's plans, however.

On the contrary, the investor's stance on taxes has received a great deal of flak from detractors.

As we approach 2012, Washington lawmakers continue to butt heads over how best to pare back the nation's looming debt.

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Disclosures:

TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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