THESE DAYS IT'S

hard to have a conversation with a top money manager without a reference to the great sloshing sound. The liquidity, they mean, that's fueling a record number of buyouts and helping send the market to new highs. While all of our experts weighed in on the uniqueness of today's market, there were myriad takes on what it all means. Though he's still bullish, T. Rowe Price's Brian Rogers can't help but speculate about what would make the market snap back or, should we say, sink the rubber ducky? He, like Berkshire Hathaway's Warren Buffett, wonders whether some terrorist event or the messy collapse of a deal might be the beginning of the end. "The pendulum always swings," Rogers is fond of saying.

Could it be a sign of the top, wonders Warren Buffett, when "a guy with a sandwich board who announces his hedge fund in the morning will get money that afternoon"? "It's baffling," he says. "I don't know the answer." No stranger to worry, Westwood Holding's Susan Byrne notes ominously that just because "we are in a virtuous cycle" of low interest rates and rising markets, it "doesn't mean we have to stay there forever." But this market ace thinks stocks will hold steady as long as the money is still moving freely around the world essentially, meaning as long as China keeps lapping up our debt.

Speaking of which, Oakmark International's David Herro, our overseas expert, wouldn't touch most Chinese stocks with chopsticks. "The valuations are a stretch," he says of their lofty prices. But lofty prices are like catnip to growth managers Ron Baron of Baron Funds is so tickled with the current market dynamics that he has opened up two previously closed funds so that he has more millions to spend. Which is all to say that in our third annual installment of The World's Greatest Investors, you'll hear very different reports on how some of the greatest investment minds plan to make a splash in this record-breaking market.

WARREN BUFFETT

It's hard to pity the high-class woes of the country's second-richest man. But being the perennial world's greatest investor doesn't mean life is easy for Warren Buffett. He can invest a billion here and there, and it still may not have much impact on Berkshire Hathaway's massive portfolio of companies and securities. "If I had less money, it would be easy to make money right now," Buffett said wistfully at his annual meeting earlier this year.

That enviable handicap notwithstanding, Buffett's record is irrefutable. Shares of Berkshire Hathaway are up 18% over the past year, and since 1965 they've returned a mind-bending 21.4% a year. A $10,000 investment in Berkshire 42 years ago would be worth $34,449,000 today; the same $10,000 invested in the Standard & Poor's 500 would be worth $638,000 mind-bending, indeed.

Christopher Davis, vice chairman of Davis Selected Advisers, which has $2 billion worth of Berkshire stock in its portfolios, still sees room for gains. He thinks the company's A shares, which recently changed hands at $109,000, are worth as much as $150,000. That said, no one expects a lunge in that direction anytime soon. Last year, an eerily quiet one for hurricanes, Berkshire's mammoth insurance earnings exploded, and the stock reacted in kind. A repeat performance is unlikely this year given that earnings will be lower. "There is no clear catalyst for the stock except for the intrinsic value of its businesses," says Tilson Capital's Whitney Tilson.

"Years ago I had too many ideas and too little cash," laments Buffett, 76. "Now I have too much money and few ideas." Which is not to say he doesn't have any of the latter. He recently took a stake in health insurer WellPoint and added to his positions in Johnson & Johnson and Sanofi-Aventis. And he put more than $4 billion to work in railroads: Burlington Northern Santa Fe, Norfolk Southern and Union Pacific.

Investors who don't want to pay $109,000 for A shares or even $3,600 for the B shares can still benefit from Buffett's advice: Put your money in an index fund if you're what he calls "a know-nothing investor." Otherwise, look for easy-to-understand companies with strong balance sheets that make something like Snickers bars, Buffett says; even if prices rise, people will still buy them. And always pay attention to a stock's price. "What else is there but value investing, really?" Buffett asks rhetorically. "Tipster investing? Dream investing? I never understood the alternative."

Buffett's Picks

BRIAN ROGERS

One of the first things you learn about Brian Rogers is that he doesn't take himself too seriously. How could he when he keeps a red plastic fire hydrant in his office? On being named chairman of T. Rowe Price in December, Rogers, 52, received this offbeat gift from two former colleagues, along with a note that read, "A T. Rowe Price chairman is to the investment staff as a fire hydrant is to a pack of dogs." That joke notwithstanding, Rogers, who is also the firm's chief investment officer, commands unusual respect within his ranks, which include 134 analysts and portfolio managers who oversee $350 billion in assets. One obvious reason, says James Dimon, chief executive of JPMorgan Chase: "Rogers remains one of them no mean feat when running a big organization." As the manager of the $26 billion Equity Income fund, Rogers has delivered an annual return of 10.1% over the past 10 years, versus 7.8% for the S&P 500.

Even more impressive is that Rogers has done so with very low volatility a feat that earned him barbs from shareholders during the bubble years, when his fund badly trailed the market. But when the S&P plunged 47% in the 2000 to 2002 bear market, Equity Income investors lost just 6%. The secret of his success: He refuses to overpay. Instead of chasing hot stocks, he prefers to buy former market darlings that have lost luster. "He manages risk better than even I do," declares crosstown rival Bill Miller, who heads up Baltimore's Legg Mason Capital Management.

One Rogers bet is very close to home: T. Rowe is the largest independent holder of Dow Jones, with 15% of the stock. (SmartMoney is owned by Dow Jones and Hearst Corporation.) In May, Rupert Murdoch's News Corp. made a $5 billion offer for Dow Jones, which if accepted would put Rogers's investment solidly in the black. The Bancroft family, which owns a controlling interest, is mulling its options. "Given the challenges of the print world," says Rogers, "we think the company will be better off in a different configuration." Dow Jones declined to comment.

In general, however, Rogers is sanguine about the prospect for stocks. "I have a tough time believing the market is undervalued at 16 times earnings," he says, "but stocks aren't overpriced either." Investors should temper their expectations and buy old reliables like 3M, General Electric and Pfizer. "But don't get emotional if prices get whipped around by market gyrations," he says, adding, "We'll see more of it."

Rogers's Picks

SUSAN BYRNE

Susan Byrne never had much choice about achieving. Her father went bankrupt, so her mother went to work and supported six children. "It not only left an impression on me but gave me the confidence that I, too, could do anything I wanted," says Byrne, founder of Westwood Holding Group. "Doing anything" translated into being one of the most insightful market watchers, one whose talent for buying undervalued stocks has paid off handsomely in the long term. Over the past 15 years, her Westwood Equity AAA fund has produced an average annual return of 13.6%, compared with a 10.7% return for the S&P 500.

Lately her portfolio's gains have been driven by her big-picture calls on globalization. She bought early into financials, energy and industrials. Then so did everyone else. That, of course, doesn't suit Byrne, 60, whose strength is seeing around the next corner. "I worry when people start agreeing with me," she says. Yet in keeping with her original theme, Byrne says that other investors "are missing some of the more subtle implications." Emerging markets aren't going to want titanium, steel and copper forever, she notes. "They want washing machines, cell phones and...plastic!" Byrne sees growth in credit card purveyors like MasterCard and American Express; developing economies need cards for secure business transactions. "From a non-U.S. point of view, our assets are a blue-plate special," Byrne says. Similarly, she likes blue chips like Colgate and Procter & Gamble, whose global exposure puts the wind at their back.

Byrne herself hasn't always had the wind at her back. In the bull markets of the late 1980s and late 1990s, her conservative approach hurt her performance, and investors fled. She had other challenges as well. Byrne sold a portion of her company to Gabelli & Co. but has been unhappy with the arrangement. Gabelli, which distributes the funds as part of the deal, set the management fees too high, she says, which is one reason that, despite her record, her firm's assets under management are a relatively small $6.5 billion. But Byrne got the last laugh when she started a lower-cost group of copycat funds WHG Funds to compete with her original funds. Gabelli & Co.'s Mario Gabelli pays her the ultimate compliment: "We own 19% of her company, and we'd like to buy it all!"

Byrne's Picks

DAVID HERRO

David Herro became the bad boy of British tabloids when he led a shareholder revolt and booted the flagrantly spending Maurice Saatchi of Saatchi & Saatchi off its board in 1994. It has worked to his advantage ever since years later people still worry about his sharp elbows whenever the manager of the Oakmark International fund amasses a large position.

But they aren't that sharp. Herro, 46, is not a slick, cutthroat product of Wall Street culture, but a fresh-faced, mild-mannered son of Wisconsin's rural Fond du Lac, whose biggest dream was preaching the free-market gospel from an ivory tower. "I love monetary theory," gushes Herro with the sort of passion many reserve for sports teams. Activism, in his view, "is a very last resort." Nor has he needed it much. Herro's $9.2 billion Oakmark International I has a 10-year annualized record of 12.0%, beating the MSCI index of developed non-U.S. markets by 3.8 percentage points. Herro makes concentrated bets in sectors and countries, so his fund can be more volatile than the index, however. In 1998, for example, he bought in early to the still-recovering Asian markets; that year the index was up 13%, but Herro's fund lost a jarring 7%.

A long-term value seeker, Herro has his own finely honed process for identifying inexpensive companies that generate lots of cash. He attempts to explain his process by grabbing a piece of scrap paper and intently drawing circles, arrows and equations. We politely change the subject to China. And here, his view is much easier to get across. "Why buy a Chinese bank with all its cronyism," he asks, when you can buy HSBC, which has a large exposure to China's markets, at one-third the price?

Moreover, he departs from Warren Buffett's view that the dollar will continue to sink against most major currencies. "As long as the U.S. stays competitive, there's nothing to worry about," he says. Indeed, he thinks the euro is overvalued, though he's quick to add that individual investors should pay little attention to currency risk when buying stock. He says it's more important just to buy companies that are cheap and that are in countries with reputable legal systems.

He likes big blue chips such as Nestle, Diageo and Novartis. "Safety remains discounted," says Herro. "Sooner or later," he adds, "money will flow out of hedge funds and float these big boats."

Herro's Picks

RON BARON

When you see Ron Baron in a photo, he's usually the one with the ear-to-ear grin. Do growth managers have more fun? "It's possible," says Baron, 64, who has $300 million of his own money invested in his $21 billion Baron Funds. He buys companies with outlooks so sunny he figures their stocks can double in five years. He also tends to invest in the companies whose CEOs he likes. Leaning back in a rocking chair that once belonged to JFK, Baron gestures to million-dollar art works by Roy Lichtenstein and Alexander Calder in his airy, sun-filled office: "How couldn't I be happy?" It's a far cry from his Asbury Park, N.J., upbringing in an apartment so tiny the refrigerator was kept on the porch.

He makes investors smile too. His flagship $6 billion Baron Growth has produced an average annual return of 13.8% over the past 10 years, compared with the S&P 500's 7.8%. And he's still bullish. "People see the economy slowing, housing being a drag and the war in Iraq taking a toll," says Baron, "but I see that along with many opportunities." Indeed, he recently reopened two closed funds, Baron Small Cap and Baron Growth, to have more money to invest. Baron closed the funds in 2002 and 2004, respectively, he says, because money was coming in faster than he could find places to put it. Morningstar, for one, is skeptical about the reopenings, stating that the two funds are already "bursting at their britches."

Fueling Baron's bullishness is the fact that "borrowed money costs 6%, but companies are earning 12%." That's huge incentive, in his view, to pump money into great companies like Whole Foods, which he thinks can easily double its number of stores to 400. And don't get him started on the gaming industry, because he may never shut up. The $130 million Baron invested in Wynn Resorts has more than quintupled, and he sees the stock doubling again. If Baron is a fan of Wynn Resorts, so too is CEO Steve Wynn a fan of Baron. "Ron has a beginner mind," says Wynn, referring to a Buddhist concept of a mind that is eager and free of preconception.

But even optimists can have a bad year. In 1999 Baron was accused of stock manipulation; he and two traders paid a $2.7 million fine to the Securities and Exchange Commission in 2003 to settle the charges. "I was looking into the abyss," Baron says. But ever the optimist, he now looks on that time as a learning experience. "We're a better company today," he says, adding, "I am blessed."

Baron's Picks