Let’s take a gander at why they bought Yahoo! They offer at least six reasons:

1. Clean balance sheet and ability to weather recession ($3 billion in net cash that the company holds is “sweet, sweet, sweet,” says Contra The Heard)

2. Insiders own close to 20% of the shares and have a strong interest in the company doing well

3. Although Yahoo! doesn’t dominate the Internet the way it did a few years ago, “it is still the busiest portal on the web and remains a top-notch property”

4. Yahoo makes money quarter after quarter on annual sales exceeding $7 billion

5. Although online revenues will drop during the recession (and Google has a technological edge), sales in the sector should increase over the long term.

6. Firms that Yahoo might acquire are getting much cheaper.

Yahoo! is so cheap, I’m tempted to side with the Contra Guys on this one now (after being skeptical following the collapse of the Microsoft bid). Stadelmann and Gallander have been investing since the 1980s and have seen a lot come and go. They’ve taken a beating lately, with a 15.5% loss in 2007 – and, no doubt, another big loss for 2008. Still, they lay claim to an average annual return of 21.8% over the past 15 years.

“What a spot it was, a veritable Smithsonian time capsule,” reported the Contra Guys. A Saturday Night Fever disco ball hung over the dance floor and white-haired septuagenarians danced to the “hardcore” elevator music dished out by an “equally fragile lounge singer.” The steak was tender but it’s “kind of sad when HP Sauce is necessary to provide, rather than accentuate, the flavour.” When the bill came for their “very filling meal replete … with a decent bottle of California wine,” the Contra Guys were amazed at how inexpensive it was.

Somehow, it’s not surprising that the richest man in the U.S. likes such a place. Buffett always did like bargains. And he never was a food connoisseur: his diet has long been heavy on hamburgers and soft drinks. And he’s often seen imbibing products of companies in which he has investment stakes, e.g. Sees chocolates, Coca Cola, Dairy Queen cones, etc.

The thing is, Buffett and his partner Charlie Munger, derive a great deal of satisfaction from what they do, which is simply “reading and thinking” as Munger describes it. They both “insist on a lot of time being available during the day just to sit and think, something rather uncommon in business.” They don’t need good food and restaurants; in fact, they would be distractions.

Oh, by the way, the Contra The Heard didn’t buy any stocks in the second quarter. But they are eyeing the beaten-up financial sector and looking forward to their usual year-end buying spree during tax-loss selling season.