Warren Buffett is one of the richest people on the planet. He has also earned a reputation for being one of the world’s greatest investors.
He did not get to where he is today by accident. Over the past seven decades, the billionaire has developed an investment strategy to help him find the best companies. And I believe that by following this investment strategy, I can also improve my returns.
With that in mind, here is one Buffett-style stock I would buy for my portfolio today, considering the company’s competitive advantages and growth potential over the next few years.
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Supermarkets giant
The company I have picked for my portfolio is the retailer Tesco (LSE: TSCO). I think this is the sort of business the ‘Oracle of Omaha’ would like to include in his portfolio because he once bought the stock.
Several years ago, he owned a significant position in the retailer. But he sold after its accounting scandal broke in 2014.
While Buffett no longer owns the position, I think the competitive advantages that helped him build the conviction required to initiate the holding still exists.
That is why I would buy the stock for my portfolio today.
The company is the largest retailer in the UK and has substantial competitive advantages. Its size means it can agree on specialist deals with retailers to push down costs for its own consumers. The business has also invested significant sums in increasing the resilience of its supply chain.
It has invested in initiatives such as electric HGVs and a rail network to bring supplies over from Europe. These initiatives have helped reduce costs and improve efficiency across the enterprise.
It is also diversified with a presence in financial services and telecommunications. These alternative initiatives give the group a diversified income stream. This may help it overcome some of the current challenges in the retail industry.
Growing challenges
These challenges include the rising cost of living crisis, which will hit consumers’ buying power. A decline in consumers’ purchasing could have an impact on sales across the UK retail sector. I think Tesco is in a better position than most to navigate these challenges, due to its diversification due to its Tesco Clubcard customer loyalty scheme.
As well as these qualities, the group also has a strong balance sheet and the stock supports a dividend yield of around 4%, at the time of writing.
I think Buffett would be interested in all of these qualities. Still, as noted above, the business will face some challenges as we advance.
As such, I am not expecting it to be plain sailing for Tesco over the next few years. I think the company’s profit margins will come under pressure as costs grow and it invests more to overcome disruptions in the economy.
Despite these potential challenges, I think the group does have the qualities required to navigate uncertainty and come out on top. That is why I would buy the shares for my portfolio today as a long-term Buffett-style investment.
