With a fortune close to $60 billion and a reputation as perhaps the smartest investor of all time, Warren Buffett has plenty of advantages over individual investors. If Buffett wants to have an in-depth discussion with the CEO of a company he's considering investing in, for example, you can bet that CEO will take Mr. Buffett's call.
In addition, Buffett's own personal fortune probably gives him an advantage in terms of being patient and focusing on the long-term—he could lose half of his net worth in the short term and still be one of the richest people in the world; if you lose half your net worth, there's a good chance that panic could set in and lead you to compound your losses with more rash decisions.
Finally, of course, Buffett's contacts and friends include some of the business and political worlds' most influential people, which one would have to imagine gives him a leg up on getting the inside scoop on a whole variety of issues that impact investing decisions.
But make no mistake: As an individual investor, you have at least one advantage over Buffett, and it's a very big one. The advantage: Buffett is constrained by the size of his Berkshire Hathaway Berkshire Hathaway empire. Because the company has a market cap of nearly $300 billion and an investment portfolio of more than $90 billion, the universe of stocks from which Buffett can choose is dramatically smaller than the universe from which you and I can choose.
In order for an investment to make any sort of significant impact on Berkshire's massive portfolio, Buffett has to be able to deploy a big chunk of capital into that investment. If he were to buy 10% of a $200 million market cap company's shares, he'd have an investment that would barely move the needle at Berkshire, regardless of how well that particular stock did.
That doesn't mean Berkshire won't occasionally invest in smaller firms. Managers Ted Weschler and Todd Combs handle smaller portfolios for the firm while Buffett focuses on Berkshire's big, core holdings, like Coca-Cola Coca-Cola and American Express American Express. That gives Combs and Weschler a chance to dip into somewhat smaller stocks.
But the point is that even if they or Buffett find a big time winner of a small-cap, it's just not going to make a big impact on the company's returns. You, on the other hand, can make the small-cap universe a big chunk of your portfolio, if that's where you see the best opportunities. (And, over the long haul, many studies have shown that small caps tend to outperform their larger peers.)
My Buffett inspired Guru Strategy uses Buffett's approach (as described in the book Buffettology, written by his former daughter-in-law and colleague Mary Buffett and David Clark) to screen thousands of stocks, including small caps.
Among the model's criteria: the company should have a decade-long track record of increasing annual earnings per share; long-term debt should be no more than five times annual earnings; average return on equity over the past ten years should be at least 15%, while average return on retained earnings (those not paid out as dividends) should be at least 12% over that span; and earnings yield should be higher than the long term Treasury yield.
The strategy often will find smaller stocks that meet its criteria, and, while Buffett and Berkshire can't really profit much from these stocks, you can. Here's a sampling of some of the small stocks it's keen on now. (As always, you should invest in stocks like these as part of a broader, diversified portfolio.)
Hibbett Sports: This Alabama-based sporting goods retailer focuses on small and mid-sized markets, mostly in the South, Southwest, Mid-Atlantic and Midwest. It has about 850 retail stores across 26 states, mostly under the Hibbett Sports name but with some also under the Sports Additions and Sports & Co. names.
Hibbett ($1.5 billion market cap) gets a 100% score from my Buffett-based model. It has upped EPS in all but one year of the past decade, has no long-term debt, and has a 23% average 10-year ROE.
Raven Industries (RAVN): Formed more than 50 years ago as a manufacturer of high-altitude research balloons for the U.S. space program, South Dakota-based Raven ($1.3 billion market cap) still makes research balloons and other products like parachutes and protective wear. It also has operations that blend technology and agriculture, making field computers, planter and boom controls, GPS guidance, and protective films and sheeting used to protect environmental resources.
Raven gets a strong 92% score from my Buffett-based model. A few reasons: Its EPS have dipped in only one year of the past decade; it has no long-term debt; and its 10-year average ROE is 25.3%.
Ebix (EBIX): Atlanta-based Ebix ($570 million market cap) supplies software and e-commerce solutions to the insurance industry. Shares have struggled over the past year as growth has slowed, but my Buffett strategy thinks that has made it a great bargain, giving it a 99% score. It likes that EBIX has upped EPS in every year of the past decade (it is on track for a dip this year, but the model sees that as a buying opportunity).
It also likes that Ebix has more annual earnings ($62 million) than long term debt ($46 million), and that it has averaged a return on retained earnings of nearly 23% over the past decade. Factor in a 10.9% earnings yield and there's quite a bit to like.
Related BZSUM Mid-Morning Market Update: Markets Mixed; Signet To Acquire Zale For $21/Share #PreMarket Primer: Wednesday, February 19: Tesla Earnings Expected Today 
Ford/APThe new 2015 Ford F-150 pickup. DEARBORN, Mich. -- Ford pickups have been doing the country's work for 66 years. They've hauled grain, towed logs and plowed snow. They've cleared debris after tornadoes and pulled floats in the Rose Bowl parade. They've shouldered those loads with parts forged from steel. Until now. On Monday, Ford (F) unveils a new F-150 with a body built almost entirely out of aluminum. The lighter material shaves as much as 700 pounds off the 5,000-pound truck, a revolutionary change for a vehicle known for its heft and an industry still heavily reliant on steel. The change is Ford's response to small-business owners' desire for a more fuel-efficient and nimble truck -- and stricter government requirements on fuel economy. And it sprang from a challenge by Ford's CEO to move beyond the traditional design for a full-size pickup. "You're either moving ahead and you're improving and you're making it more valuable and more useful to the customer or you're not," Chief Executive Officer Alan Mulally told The Associated Press in a recent interview. Ninety-seven percent of the body of the 2015 F-150 is aluminum, the most extensive use of aluminum ever in a truck. And this isn't just any truck. F-Series trucks -- which include the F-150 and heavier duty models like the F-250 -- have been the best-selling vehicles in the U.S. for the last 32 years; last year, Ford sold an F-Series every 41 seconds. The key question for Ford, and the people who sell its trucks, is: Will customers embrace such a radical change? Dealers who have seen the new F-150 say they expect to encounter some skepticism, but the change had to be made. "We're aggressive, stretching the envelope," said Sam Pack, owner of four Ford dealerships in the Dallas-Fort Worth area. "I think you have to do that. If you don't, then you get into that predicament of being a 'me too' vehicle." Still, it's a big risk. Ford makes an estimated $10,000 profit on every F-Series truck it sells, making trucks a $7.6 billion profit center in the U.S. alone last year. And the company has had some quality issues with recent vehicle launches, adding to dealers' worries. The 2013 Escape small SUV has been the subject of seven recalls. The 2015 F-150 goes on sale late this year. While aluminum is more expensive that steel, Ford truck marketing chief Doug Scott says the F-Series will stay within the current price range. F-Series trucks now range from a starting price of $24,445 for a base model to $50,405 for a top-of-the-line Limited. It's difficult to calculate how much more aluminum costs, since there are different grades of aluminum and steel. Pete Reyes, the F-150's chief engineer, said Ford expects to make up the premium by reducing its recycling costs, since there will be less metal to recycle, and by slimming down the engine and other components, since they won't have to move so much weight. Aluminum was used on cars even before the first F-Series went on sale in 1948. It's widely used on sporty, low-volume cars now, like the Tesla (TSLA) Model S electric sedan and the Land Rover Evoque. U.S. Postal Service trucks are also made of aluminum. Ford has spent decades researching the metal. Twenty years ago, the company built a fleet of 20 all-aluminum experimental sedans. Later, it used aluminum on exotic cars from Aston-Martin and Jaguar, brands it used to own. But up to now, Ford limited the aluminum on its trucks to the hoods and used steel for the rest. Higher Fuel-Economy Mandates New government fuel economy requirements, which mandate that automakers' cars and trucks get a combined 54.5 miles per gallon by 2025, are speeding the switch to aluminum. Chrysler's Ram is currently the most fuel-efficient pickup, getting 25 mpg on the highway. The current F-150 gets as much as 23 mpg. Ford won't say what the new truck's fuel economy will be, but says it will trump the competition. That could be an especially important incentive for landscapers, carpenters and other small business owners focused on their bottom line. "I think that's going to outweigh the aluminum part of it," said Brian Jarrett, a Ford dealer in Winter Haven, Fla., who hasn't yet seen the new truck. Improvements in aluminum are also driving the change. Three years ago, for example, Alcoa Inc. (AA) -- one of Ford's suppliers for the F-150 -- figured out a way to pretreat aluminum so it would be more durable when parts are bonded together. Carmakers can now use three or four rivets to piece together parts that would have needed 10 rivets before, Alcoa spokesman Kevin Lowery said. And Ford is able to take more risks. When the F-150 was last redesigned, in the mid-2000s, Ford was losing billions each year and resources were spread thin. But by 2010, when the company gave the green light to an all-aluminum truck, Ford was making money again. CEO Alan Mulally, a former Boeing Co. (BA) executive who joined Ford in 2006, encouraged his team to think bigger. After all, it was Mulally who led early development of Boeing's Dreamliner, which replaced aluminum with even lighter-weight plastics to be more efficient and fly further. "Everything becomes more efficient once you take the weight out," Mulally says. He expects aluminum to be used across Ford's model lineup in the future. Ford is convinced truck buyers will accept the change. The company says the new truck will tow more and haul more, since the engine doesn't have to account for so much weight. It can also accelerate and stop more quickly. Aluminum doesn't rust, Ford says, and it's more resistant to dents. Reyes says the company planted prototype F-150s with three companies -- in mining, construction and power -- for two years without revealing they were aluminum. The companies didn't notice a difference. Mulally says Ford's customers have already shown a willingness to adopt new technology. Forty percent of the F-Series trucks sold last year had Ford's more efficient EcoBoost engines, for example, which were introduced just three years ago. And Mulally says owners trust Ford. Ford will still have a tough time wresting customers from the competition, mainly Chevrolet, GMC and Ram, says Jesse Toprak, an independent auto industry consultant in Los Angeles. Brand Loyalty "Movement between brands in the full-size truck segment is extremely minimal," Toprak says. "It's the strongest loyalty of any segment." Still, about 20 percent of pickup buyers traditionally are open to jumping from brand to brand based on features or price, Toprak said. The company with the newest, most advanced truck has the advantage in getting those customers, plus those who are new to the market, Toprak says. Some steel remains on the truck. The frame beneath it is built primarily of high-strength steel, which Ford says will make it tougher and stiffer than the current frame. There's also steel in the front dashboard, because Ford thought steel was better at dampening nose from the engine. In all, a four-door F-150 has 660 pounds of aluminum, or nearly double the average use of aluminum per vehicle used now, according to Drive Aluminum, an aluminum industry website. If the Ford truck is a success, use of aluminum could expand rapidly at the expense of steel. "People are beginning to truly understand the value that aluminum can bring to the table," Lowery said. Ford is expecting some issues with the design or the manufacturing as it makes the change, Mulally said. But the company is working hard to troubleshoot. "I think the attitude is, expect the unexpected and expect to deal with it," he says. "Sometimes I think our core competency is scrambling. That's not unique to Ford." Mulally, who grew up driving an F-150 on his family's farm in Kansas, particularly likes the new truck's front windows, which dip down 2 inches for better visibility. "That's just an unbelievable innovation. You're sitting up there and you need to know where you are," he says. "I think that is absolutely a laser focus on what the customer wants and values." 
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Pete Marovich/Bloomberg via Getty ImagesFacebook CEO Mark Zuckerberg SEATTLE -- Mark Zuckerberg and his wife, Priscilla Chan, were the most generous American philanthropists in 2013, with a donation of 18 million shares of Facebook (FB) stock, valued at more than $970 million, to a Silicon Valley nonprofit in December. The Chronicle of Philanthropy reported Monday that Zuckerberg's donation was the largest charitable gift on the public record in 2013 and put the young couple at the top of the magazine's annual list of 50 most generous Americans in 2013. The top 50 contributors made donations last year totaling $7.7 billion, plus pledges of $2.9 billion. The Chronicle's editor says the most significant fact from the list was the amount of money coming from living donors, which totaled about the same amount as the two previous years combined. "It's a sure sign that the economy is getting better and people are getting a lot less cautious," said Stacy Palmer, Chronicle editor. Some of the nation's biggest givers do not appear on the 2013 list, not because they stopped being generous, but because their donations in 2013 were counted as pledges in previous years. For example, Microsoft (MSFT) co-founder Bill Gates and his wife, Melinda, gave their foundation slightly more than $181.3 million last year, but they were paying off a pledge of about $3.3 billion they made in 2004. CNN-founder Ted Turner and Berkshire Hathaway (BRK-A) (BRK-B) chairman Warren Buffett also made large gifts toward previous pledges. It took gifts totaling at least $37.5 million to make the list this year. Forty-two of the top 50 made gifts of $50 million or more. Thirty made big gifts to colleges and universities, but Palmer noted most college gifts went to science and research this year, not to buildings, as in previous years. Ten of the 50 made the list because of bequests after their deaths, including the second biggest giver in 2013, George Mitchell, a Galveston, Texas, man who made his fortune in energy and real estate. At No. 3 were Nike chairman Philip Knight and his wife, Penelope, of Portland, Ore., who made a $500 million challenge grant to Oregon Health & Science University Foundation for cancer research. The Knight pledge requires the university match it within the next two years. No. 4 was philanthropist and former New York mayor Michael Bloomberg, who made gifts totaling $452 million in 2013 to arts, education, environment, public health and other causes. Nineteen people or couples on the list have signed the Giving Pledge, started by Bill Gates and Warren Buffett in 2010. More than 120 of the world's wealthiest individuals and families have pledged to give at least half their wealth to charity since the movement began.
