Unfortunately, Warren Buffett doesn't invest in sm

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Today, being so large and successful is a problem even for Buffett. His challenge lies in how to compound such large sums of money at ever increasing rates. To continue generating high-level compound returns on a massive portfolio, Buffett must take very large positions and only select from the best of large cap stocks. As such, the stocks that meet his threshold have narrowed dramatically.

During a shareholders meeting in 1999, Warren Buffett lamented that he could generate 50% returns if only he had less money to invest. He couldn't compound $100 million or $1 billion, at a 50% rate. That's because it's the smaller, faster growing companies that typically offer the highest returns.

Small capitalization stocks, however, can't help Warren Buffett. For example, if Buffett invested in a $240 million market cap company and its value doubled, the impact would increase Berkshire Hathaway's portfolio by just 0.3%. Considering the amount of research involved, it may not be worth his while.

Buffett stays away from small cap stocks, despite their potential for high returns because he neither wants to cause a run up in the price of a small cap stock, nor does he want a controlling stake.

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