Berkshire Hathaway (BRK-A) chairman Warren Buffett is quotable on many counts, famously among them his reluctance to wager on any business that he claims not to understand. Which, by the way, 1) is about as sage a recommendation as any investor could receive, and 2) shouldn’t be taken literally. Buffett might not know all the intricacies of manufacturing machine tools and fittings for oil and gas companies, but he knows how to read a balance sheet (to put it lightly). That's why Berkshire Hathaway’s holdings include 1.8 million shares of Now Inc. (DNOW), an unpublicized but profitable Houston-based oil and gas distributor with a penchant for growth.

Unearthing Opportunities

Berkshire and another heavyweight, General Electric (GE), have recently taken an interest in Israel-based eVolution Networks, whose flagship product is little more than specialized software. Known as Smart Energy Solution (SES), it’s thousands of lines of code that enables telecom companies to shut down base stations during slow periods, thereby helping the companies reduce their power bills. It might take a few more words to describe how eVolution Networks makes its money than, say, Coca-Cola (KO) or Wells Fargo (WFC) (to name two of Berkshire Hathaway’s biggest investments), but saving corporate clients lots of money is a business strategy that Buffett has no problem wrapping his head around.

Although eVolution Networks’ forte might seem almost too narrow a niche to be lucrative, don’t forget that this is a big planet, and that telecommunications is a big industry - $2.4 trillion annually, by at least one estimate. (For more, read: How To Pick the Best Telecom Stocks.) Berkshire Hathaway and GE are investing a total of $22.5 million in eVolution Networks, allowing the four-year-old startup to expand its operations worldwide. (Technically, Berkshire’s undisclosed share of the funding is via one of its major subsidiaries, Intelligent Energy Solutions.)

Reducing Expenses Is Still Making Money

How much do wireless services companies spend on power, anyway? EVolution Networks claims that energy costs can represent 10%-30% of a telecom’s budget. So for the likes of AT&T (T), that could be upwards of $18 billion. AT&T, at least by revenue, is twice the size of Spanish telecom giant Telefonica (TEF). Which just so happens to be eVolution Networks’ prize new client, and which hopes to reduce its power bills by 35% once SES is up and running. Should Telefonica save the predicted billions by using eVolution Networks as a vendor, Buffett's initial $22.5 million eVolution investment could prove as prescient a move as his early 1960s decision to buy Berkshire Hathaway (then a humble New England textile mill) in the first place.

A Market to Itself

As mobile networks compete by offering customers more data per dollar, the good news is that providers' margins still remain high. The downside is that offering more data means that more energy is consumed by network base stations, which are extremely expensive pieces of infrastructure that cost the networks long after the initial capital outlay. (If you’re curious, next time you see a cell tower, check the meter and how quickly it spins.)

Most towers operate at full capacity, all day and night. This may seem like overkill (really? They’re as busy at 4 a.m. as at 8 p.m.?), and networks would likely agree with you. Towers are always at full power because the scalable equivalent of virtual “dimmer switches” doesn’t exist. Or it didn’t, until eVolution Networks hit the scene. The company analyzes coverage for each tower in a network and reduces power consumption accordingly. In real time, no less. To a mobile phone user, SES is a somewhat arcane footnote that might hopefully reduce one’s bill by a few cents. For an AT&T or a Telefonica, SES could change everything.

The Bottom Line

eVolution Networks has grown internationally since receiving $4 million in funding in 2013. Now, with the backing of its new big-league investors, the company should have all the room it needs to grow even larger.

If you wanted to go contrarian and do the opposite of everything Warren Buffett's ever done, you’d be…well, either the poorest or second-poorest person on Earth. This is someone whose idea of a “mistake” is making a one-day $43 million profit on a position in Tesco. Buffett strikes out less frequently than Michael Brantley and, stretching the analogy perhaps a little too far, eVolution Networks is a 60-mph fastball coming straight over the plate. The upside of revolutionizing the heretofore-unknown market of cell tower cost reduction is so great that taking a position in eVolution Networks might be one of the shrewdest moves Buffett has made in a career full of them.

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