When I was first trying to find my way in the stock market, I stumbled across some Warren Buffett videos. And it’s probably the best thing that could have happened to me as an investor.
Listening to the billionaire investor has helped me avoid all sorts of schemes that are unlikely to produce long-term returns. But how would the ‘Oracle of Omaha’ start investing in 2026?
Start small
At the 2024 Berkshire Hathaway annual meeting, a shareholder asked Buffett how he’d start investing with a million dollars. And the answer was interesting.
The CEO said he’d focus on small companies – the kind that aren’t big enough to be meaningful for larger market participants. That’s where he thinks the best opportunities are.
Buffett cited a regional railroad that not a lot of other investors were paying attention to back in the 1970’s. It isn’t operating these days, but it’s an interesting example of what to look for.
Investors setting out on this path need to be prepared to think for themselves. There isn’t much analyst coverage to help you figure out small companies – but that’s exactly the point.
According to Buffett, those who are willing to look can find opportunities to earn a 50% annual return. But that involves looking where others aren’t willing to.
I don’t have an obvious idea for getting that kind of result. But I think the UK – especially the smaller end of the market – is a good place for investors aiming for exceptional returns to look.
Industrial lighting
One example is FW Thorpe (LSE:TFW). The company has a market value of £352m, but £63m in net cash on its balance sheet brings this down to £262m.
The firm’s a supplier of industrial lighting and its products are used in places like tunnels, hospitals, and airports. And this is an important part of what makes the stock interesting.
Reliability’s key in these locations and lighting has to meet strict technical standards. It’s not as simple as screwing in some lightbulbs and this creates a barrier of entry for competitors.
This is a key part of what makes the stock interesting from an investment perspective. And at a price-to-earnings (P/E) ratio of 13 (based on this year’s earnings), it’s not exactly expensive.
An important part of figuring out which stocks to buy is thinking through the risks. With FW Thorpe, the company’s size means it competes against bigger firms with scale advantages.
Importantly though, the organisation has a reputation for quality. And its structure means its able to offer its customers a level of responsiveness that larger businesses can’t easily emulate.
Being brave
Those of us who aren’t Buffett need to be careful with investing as if we are him. But there’s nothing wrong with trying to stand out from the crowd in a measured and considered way.
For those looking to do this, I can’t think of a better investor to take advice from. And that means trying to find opportunities that others might be missing.
I can’t find an analyst covering FW Thorpe, so there are no price targets or earnings estimates. But that might mean it’s the kind of unusual stock to consider that could help a new investor’s portfolio stand out.
