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Berkshire Coverage

Small Investors' Edge Over the Oracle

Though Buffett might like these names, they're likely too small for Berkshire.

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We're big fans of Warren Buffett's investing style here at Morningstar. Like Buffett, we see a stock as a true stake in a business and not just a piece of paper. That's why we are always looking for high-quality firms, with lasting competitive advantages, that are trading at a discount to what we reckon they're worth. We don't necessarily believe that we will be able to beat the Oracle's stock-picking record, but we do think this strategy will help us earn outsized returns over the long run.

One advantage that individual investors do have over Buffett is size. To be sure, scale has its advantages. Witness Berkshire's ability to score attractive returns from a special deal to buy preferred stock in companies such as  Goldman Sachs (GS). But Berkshire has a massive amount of capital to deploy, meaning that it must focus on stocks with large market caps because there isn't enough liquidity for it to take equity stakes in small firms.

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Jeremy Glaser does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.