Warren Buffett Is Bullish On America

Billionaire investor Warren Buffett carries a lot of weight in investment circles because of his long record of picking winners.

And while many investors in recent months have sought safety in precious metals and developing markets, the Oracle of Omaha says he still believes the U.S. is the place to invest.

"Money will always flow toward opportunity, and there is an abundance of that in America," Buffett wrote in his annual letter to Berkshire Hathaway shareholders.

Flush with cash

Berkshire Hathaway had $38 billion sitting in cash at the end of 2010 and in his letter, Buffett drop some not-too-subtle hints that he's eager to snap up another company, like his 2009 acquisition of the Burlington Northern Railroad.

However, no one is interpreting his letter as a buy recommendation for Wall Street in general. After all, stocks have had an impressive run over the last two years, since bottoming in March 2009.

And despite the intense political focus in Washington on growing budget and trade deficits, Buffett seems less concerned that will have a serious drag on the investment climate.

Rather than buying the market in general, Buffett appears to be suggesting a search for under-valued U.S. companies that have solid growth potential. And where might he be looking for such stocks?

Betting on housing

Lately, Buffett appears to be betting on a U.S. housing market recovery, acquiring a leading brick manufacturer in Alabama and building a $55 million roofing plant in Ohio.

"A housing recovery will probably begin within a year or so. In any event, it is certain to occur at some point," Buffett writes.

The most recent existing home sales data from the National Association of Realtors suggests other, smaller investors share Buffett's view on the housing market. Investors accounted for 23 percent of January home purchases. Investors bought 17 percent of the homes in December and 20 percent in January 2010.

Total housing inventory at the end of January fell 5.1 percent to 3.38 million existing homes available for sale. That represents a 7.6-month supply at the current sales pace, down from an 8.2-month supply in December. The inventory supply is at the lowest level since December 2009 when there was a 7.3-month supply.

If inventory levels continue to decline, that could be a positive sign for the housing market. However, if the foreclosure rate begins climbing again, if could bring more distressed properties to market, which would drag down prices.