Given the market's recent performance, the latest economic data and the near certainty that another interest rate increase is less than three weeks away, this is probably an excellent time to repeat some sound counsel from the person who, in my opinion, is probably today's most insightful investor.

Actually, Warren Buffett has reiterated the following advice so many times that he is starting to sound like a broken record. Specifically, he says that, "In the short run, the market's a voting machine and sometimes people vote very unintelligently. In the long run, it's a weighing machine and the weight of business, and how it does, is what affects values over time."

Furthermore, Buffett usually goes on to point out that he only invests in companies that he understands and that he believes are selling for less than they are worth.

As Buffett repeatedly points out, investing is not about deciding what the markets are going to do. Market direction will always be unpredictable. However, a company's prior accomplishments and dividend policy are ascertainable with complete certainty.

From there, the problem becomes relatively straightforward. You simply need to find those corporations with winning records of accomplishment and whose product lines you understand. This last point cannot be stressed strongly enough: You need to fully understand a company's line of business.

As a test, take a step back and ask yourself if you really understand how, and from where, those profit or loss numbers were derived. If you cannot answer yes in a minute or two, then move on. Leave the complicated stuff to those who can afford the loss.

Would you like an easy-to-understand company? Then, let me ask you, do you understand coffee? More importantly, do you understand Starbucks coffee? A year ago when I wrote about Starbucks, its shares had just closed at $42.57, with a calculated intrinsic value of $51 per share. On Friday, the shares closed at $49.42, for a one-year gain of 16 percent.

At the end of July, Starbucks reported that it earned 31 cents per share in its fiscal third quarter, a 29 percent increase over the 24 cents it earned a year ago. Meanwhile, revenue came in at $1.6 billion, a 21 percent increase, while same-store revenue increased 7 percent.

Operating margins also improved as the cost of sales, and related occupancy costs, decreased slightly to 40.6 percent of total revenue from 41 percent, due to higher revenue per transaction and moderately lower dairy costs.

Total revenue growth is expected to increase by about 20 percent in fiscal 2005, with same-store sales growth "at the high end" of a 3 to 7 percent range for the remainder of the year, according to the company.

For fiscal year 2006, Starbucks is offering up future earnings guidance of between $1.44 and $1.47 per share. The company also reiterated its long-term goal of reaching the 30,000-store mark.

To calculate Starbuck's intrinsic value, I used an initial earnings number of $474 million and Wall Street's 5-year average earnings growth rate of 21.9 percent. Taking the earnings out 10 years, and discounting them back at a rate of 11 percent (average return of the S&P 500), yields a net present value of $8.23 billion.

Beyond the 10th year, if you lower the earnings growth rate to 6 percent and increase the discount rate to 12 percent, the result is a net present value of $21.4 billion. (The exact formulas are available on RuddReport.com.)

If you then add those two figures together, subtract the long-term debt of $3.1 million and divide by the 384 million shares outstanding, the result is a per-share intrinsic value of $77.06.

My earnings estimate for the 2006 fiscal year is $1.48 per share. Multiplying that earnings figure by the current P/E ratio of 43.7 yields a share price of $64.68, for an annual gain of 29 percent. Even with a 50 per cent error, you still have a reasonable return on your money.