Thinking Small, Buffett-Style

In an interview with FOX Business Network, Validea CEO John Reese recently looked at how his market-beating Warren Buffett-inspired model works — and why small investors actually have at least one big advantage over the “Oracle of Omaha”. Reese delves into some of the fundamental criteria his Buffett model uses, such as high return on equity and persistent earnings growth. He says that, while individual investors can use such fundamental criteria to target thousands of stocks of all sizes, Buffett is constrained by Berkshire Hathaway’s size; only by investing in extremely large stocks can he really move the needle on Berkshire’s huge portfolio. Reese looks at five small-cap stocks that pass his Buffett-based approach — stocks that Buffett might be interested in but which are too small to be of interest to Berkshire. Among them: pawn broker First Cash Financial Services.

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