Famous investor Warren Buffett is no longer running the show at Berkshire Hathaway (though he remains chair).
But I think there is still lots to be learned by a small private investor from the billionaire Sage of Omaha’s wisdom when hunting for shares to buy.
Here is a trio of UK shares I think demonstrate the sorts of characteristics Warren Buffett has often mentioned looking for in shares to buy.
Diageo
To start with, a share that Warren Buffett did actually buy (and later sold) in the distant past, when it traded under the name Guinness.
Today the black stuff remains an important brand in the portfolio of premium drinks owned by Diageo (LSE: DGE). It also owns a host of premium spirits brands.
Warren Buffett likes well-established brands that can command a price premium (he is a long-term shareholder in Coca-Cola).
He also likes the fact that consumer goods brands can build customer loyalty, keeping people coming back for more year after year.
But while Diageo is highly profitable, there is a risk that shifting drinking habits could hurt sales revenues.
That was one reason Warren Buffett’s investment in Kraft Heinz underperformed many other deals he made: consumers increasingly lost their taste for processed food. There is a risk that a similar trend could hurt alcohol sales.
Still, I own Diageo shares with no plans to sell. Like Warren Buffett, I aim to be a long-term investor.
J D Wetherspoon
Sticking with the booze – though food and accommodation are also part of its business – I reckon J D Wetherspoon (LSE: JDW) is a share investors should consider.
Warren Buffett likes a business to have what he calls a “moat”: a competitive advantage that sets them apart from rivals. Spoons has one in my view: a national chain of individually named pubs, that benefits from economies of scale. Its value proposition for drinkers is unrivalled on a national scale.
While falling alcohol sales are hurting Diageo, Spoons’ wider offering means it remains in growth mode.
The risk I see, that it has mentioned often, is growing national insurance, alcohol duty, and wage costs eating into already slender profit margins.
Still, with its strong value reputation and large customer base giving it a moat, I see a lot to like about the business.
Bunzl
Over 20 years ago, Berkshire, under Warren Buffett, bought McLane from Walmart. Maclane is a grocery and foodservice distributor, still owned by Berkshire.
Like grocery retail, logistics for the industry tend to be high volume but at low profit margins. So operational efficiency and economies of scale matter.
That is also true for UK-based international logistics company Bunzl (LSE: BNZL).
Bunzl sells plastic spoons, cups, takeaway boxes, paper towels, liquid soap, and the thousands of other small but essential products foodservice operators need to keep running.
Such a business benefits from ongoing demand across the economic cycle. People still need to eat and cleaning goes on.
Another thing I like is Bunzl’s decades-long run of annual dividend increases. Warren Buffett’s stake in Coca-Cola has shown how annual dividend growth over decades can add up.
Bunzl’s share price has crashed 37% in a year. Uneven performance in north America remains a risk.
But the company has been addressing it and I have recently bought more Bunzl shares.
