We contributed to an article in this week’s Barron’s that discusses the prospects for Lowe’s Companies, one of the giants in the home improvement industry and a stock we have been buying for our portfolios.  Following are a few highlights:

Obviously the major players like Lowe’s [(LOW)] and bigger rival Home Depot (HD) are in a much better position than small local or regional suppliers…. “We believe Lowe’s will continue to gain share and increase profits primarily at the expense of smaller competitors, who cannot match the company’s purchasing power,” says Jordan Smyth, a managing director at Edgemoor Investment Advisors in Bethesda, Md.  His firm, with $380 million in assets, has been buying Lowe’s….

Smyth contends Lowe’s has plenty of room to expand in the fragmented $695 billion retail hardware market where in 2009 it held only a 7% share, lagging behind Home Depot’s 10% share.  Edgemoor expects the overall market to grow at 5% a year up to 2013.

Click on this link to view the full article at Barron’s (subscription may be required), or you can watch some video highlights here.  We also reviewed Lowe’s in our last quarterly report, which you can access from our website by clicking here.

Berkshire Hathaway recently released its annual report, including Chairman Warren Buffett’s widely-read letter to shareholders.  As always, Buffett’s letter provides a combination of wise observations and witty remarks and, in the process, gives the reader insight into how one of the most remarkable investors of all time views current market opportunities.  Many followers of Berkshire Hathaway, including us, eagerly await this annual letter and pore over Buffett’s words to add to our investing knowledge.

This year, in light of Berkshire’s pending purchase of Burlington Northern Santa Fe and the recent addition of Berkshire’s stock to the S&P 500 index, Buffett uses the letter to “review some of the basics of our business, hoping to provide both a freshman orientation session for our BNSF newcomers and a refresher course for Berkshire veterans.”  As a result, this year’s letter is a particularly good place to get a thorough understanding of Berkshire’s investment philosophy and an overview of its businesses.

Morningstar provides some good highlights from the letter in Nine Nuggets from Berkshire’s Annual Report.  Go to this summary, and you will find such Buffett classics as, “Sing a country song in reverse, and you will quickly recover your car, house and wife.”  On more of a business note, you will also see that Buffett believes “within a year or so residential housing problems should largely be behind us.”  If you would like to read the entire shareholder letter, you can access it by clicking here.

As we commented in an earlier post, we view Berkshire’s addition to the S&P 500 as a positive for the stock over time, and we are encouraged by what we read in Buffett’s most recent letter.  We will once again attend the annual meeting in Omaha in early May and look forward to sharing some thoughts with you when we return.  Although we will be flying to the meeting, we had to chuckle at Buffett’s P.S. to the shareholder letter: “Come by rail.”