Morningstar Picks from Berkshire's Portfolio

Investment conglomerate Berkshire Hathaway recently released its first-quarter Form 13-F, which disclosed the company's equity investments as of March 31, 2007. Berkshire's investment portfolio is run by Chairman and CEO Warren Buffett, as well as his colleague at auto insurer GEICO, Lou Simpson. Both have impressive long-term investment track records. By comparing their picks with Morningstar's 5-star stock universe, investors can potentially uncover some very attractive investment ideas.

At this year's Berkshire Hathaway annual shareholders meeting, Buffett said that when analyzing securities at Berkshire, they favor companies where they can have a very good idea of what the business will look like down the road. What's more, he said that when Berkshire looks to buy a business or stock, it wants to purchase those that have earned--and can continue to earn--high returns on capital for owners. At Morningstar, they have a similar focus on identifying businesses with high returns on capital, and they define these types of companies--partially borrowing a phrase from Buffett--as possessing an "economic moat."

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