Research Like Buffett

How did Warren Buffett become one of the best investors who's ever lived? Even though he's often downplayed the importance of a stratospheric IQ when it comes to investing, Buffett is one smart cookie. I'm sure he's also had a bit of luck along the way.

But one thing that's always jumped out at me is the man's work ethic and extreme dedication to investing. Case in point: In his early years, Buffett claims that he found opportunities by scouring the entire catalogue of publicly traded companies.

Not surprisingly, when asked how individual investors can score the juiciest returns, Buffett has suggested taking the same nose-to-the-grindstone approach. And that's exactly what I've started to do.

Continuing that herculean effort, here are the next four stocks on the list.

Source: CAPS, Yahoo! Finance, and Capital IQ, a Standard & Poor's company.

IFS is an Australia-based company that provides framework and scaffolding services for construction projects. The company is only a bit over two years old, but management has its sights set on growing quickly and expanding margins by tapping infrastructure development in Asia and the Middle East.

I don't see much of a competitive moat in this business. That doesn't mean that it will fail, but it does mean that competition won't have a tough time challenging growth and chipping away at margins.

Early financial results don't do much to change the picture -- the company has reported both negative net income and free cash flow. I feel pretty comfortable stamping a "pass" on IFS.

Source: CAPS, Yahoo! Finance, and Capital IQ, a Standard & Poor's company.

I'll admit it, I have a soft spot for analog and mixed-signal semiconductor companies. It's not that I enjoy the highly cyclical nature of the semiconductor industry in general, it's more that I appreciate the high level of skill that goes into engineering high-quality analog devices.

That engineering expertise isn't just an academic matter, it's what allows National Semi to post gross margins above 60% on its chip sales.

National Semi certainly isn't alone in its analog and mixed-signal expertise, but it is an industry where the technical hurdles are such that Joey Bagadonuts can't easily hang a shingle and start competing. And even if Joey does have some technical know-how, it's still going to take some time to build the kind of reputation that would let him compete for major customers like Apple (Nasdaq: AAPL) and Nokia (NYSE: NOK).

Despite a leveraged buyback in 2007, the company still has a pretty reasonable balance sheet, it produces healthy amounts of cash flow, and it even pays a moderate dividend. Though the stock's valuation doesn't look particularly appealing, things have been looking up lately, and we could be looking at the early stages of the next cyclical upswing.

I'm definitely dog-earing National Semi.

Source: CAPS, Yahoo! Finance, and Capital IQ, a Standard & Poor's company.

Zaldiva is a retailer of comic books, toys, and collectibles. The company has a website at Zaldiva.com and a brick-and-mortar store in Ft. Lauderdale, Fla.

While I can understand the desire to own and run a business like this -- particularly for a big fan of comics -- there's little appeal to speak of here from an investor's perspective. Competitive advantage is razor thin (if it even exists), and the company has been burning through cash for years. This is an easy pass.

Source: CAPS, Yahoo! Finance, and Capital IQ, a Standard & Poor's company.

I'll admit it, after reviewing the most recent presentation from PowerSafe Technology, I was intrigued. The company is working on discrete amplification sensor technology, which is basically a way for semiconductors to significantly amplify a signal without introducing too much distorting noise. The technology could be very useful in a wide variety of industries.

However, the key phrase above is "working on." The company is still in development stage and burning through invested capital. This is another easy pass.

We've now knocked another four off the list, but still have 12,627 companies left to go. Be sure to stay tuned for the next installment!

Think this process is too long and tedious? Austin Edwards believes he's found your next big winner.