There is no fundamental difference, according to Warren Buffett, between buying a business outright and buying a piece of that business, in the form of shares of stock. Of the two, he has always preferred to directly own a company, for it permits him to influence the business’s most critical issue: capital allocation. Buying its common stock instead has one big disadvantage: You can’t control the business. But this is offset, Buffett explains, by two distinct advantages: First, the arena for selecting noncontrolled businesses—the stock market—is significantly larger. Second, the stock market
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