Warren Buffett has said that he made the best returns in the 1950s when he was managing a small pool of money that enabled him to be nimble and consider more ideas. Today, his Berkshire Hathaway (NYSE: BRK-B)(NYSE: BRK-A) is a Goliath that manages a stock portfolio that's valued at more than $150 billion. That forces him to avoid small-cap stocks like Impinj, Inc. (NASDAQ: PI), WisdomTree Investments (NASDAQ: WETF), and National Beverage (NASDAQ: FIZZ) -- all of which our Motley Fool investors think are buys.
Helping companies know "what" and "where"
Todd Campbell (Impinj): Y'know what type of stocks don't show up in Warren Buffett's portfolio? Small-cap stocks. The Oracle of Omaha's company is simply too big to buy enough shares in fast-growing small-cap companies to move the needle.
His loss. Your gain.
While Buffett's hunting for big-cap bargains, you have thousands of up-and-comer stocks to choose from. Since small-cap stocks historically outperform big-cap stocks, stashing some of these little gems into portfolios makes sense.
If you agree, then one small-cap stock I think you should consider buying is Impinj. Impinj is at the forefront of radio frequency ID (RFID) technology that's used by companies to identify, track, and manage items (i.e. luggage) and inventory (i.e. warehouses and stores). Impinj's soup-to-nuts RFID solution includes RFID tags, software, and readers that, when coupled together, can save time, effort, and money. They allow companies to find products quickly, reduce theft, and enhance just-in-time inventory management.
A growing list of customers is producing significant revenue growth, including a 31% year-over-year improvement, to $34 million in Q2. Plus, this emerging company is showing it can turn a profit, with earnings per share (EPS) clocking in at $0.06 last quarter. Even better, Impinj is only getting started. In the future, RFID technology could be used to fully automate distribution centers and enable walk-in/walk-out shopping -- no cashier necessary!
With a market cap that's below $800 million and a growing list of customers that cut across retail, consumer goods, healthcare, and industrial goods, Impinji is a great stock to buy for the long haul.
Another player looking to beat the market
Dan Caplinger (WisdomTree Investments): Warren Buffett is well-known for his massive investment portfolio, and much of the success of his business ventures has hinged on his ability to earn above-market returns over the long haul. That doesn't preclude Buffett from investing in an exchange-traded fund (ETF) provider like WisdomTree Investments, especially as it, too, believes that it can outpace popular market benchmarks with its innovative ETF offerings. However, with a small market capitalization of about $1.25 billion, WisdomTree is so small that it precludes even a strategic investment from Buffett.
Yet some investors believe that WisdomTree deserves attention from other would-be acquirers. Recently, reports surfaced that ETF rival Guggenheim could receive an acquisition bid from a much larger investment company, with some expecting a deal by the end of the month. An opportunistic buyer could see value in WisdomTree now, which has seen its stock suffer due to the fact that some of its key ETFs have fallen out of the ranks of top performers on an absolute basis in the past couple of years.
WisdomTree is working to get itself back in the game with new fund offerings. If it finally taps into some popular investing strategies that gain traction, the ETF manager could prove its ability to deliver market-topping performance for its shareholders.
A sparkling alternative to Coca-Cola
Demitri Kalogeropoulos (National Beverage): Buffett has been a fan of Coca-Cola, the stock and the drink, for decades. But if he could invest in smaller-capitalization companies, he might zero in on its tiny rival, National Beverage.
Sure, it has nothing approaching the dominant market position that Coke enjoys. But through a focus on non-traditional carbonated drinks, including the blockbuster LaCroix brand, the bulk of National Beverage's portfolio is already geared toward the healthy, sparkling water niches that Coca-Cola is working hard to serve.
That branding success is producing bubbly returns for investors. Revenue improved by 17% in the last fiscal year. Even better news for the business is National Beverage's stellar pricing power -- a favorite Buffett metric. Rising average prices helped operating profit margin pass 20% of sales last quarter to put it just below Coca Cola's market-leading result.
National Beverage is hoping to extend its portfolio deeper into the booming market for sparkling-water drinks by scaling up distribution and marketing around its Shasta brand. It's a crowded market, but the potential payoff is huge. The company estimates that demand in this niche is rising at four times the rate of bottled water as soda fans experiment with more natural alternatives to traditional colas.
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Dan Caplinger owns shares of Berkshire Hathaway (B shares). Demitrios Kalogeropoulos owns shares of Berkshire Hathaway (B shares). Todd Campbell owns shares of Impinj. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Impinj and WisdomTree Investments. The Motley Fool has a disclosure policy.