The past couple of months have seen huge investor interest in Space Exploration Technologies (NASDAQ: SPCX). A rocket company like SpaceX may seem far from the expertise of billionaire investor Warren Buffett, with his fondness for longstanding businesses like insurers and food manufacturers.

But Buffett did not earn those billions in the stock market by being a bad investor! So what might I learn from him when I consider whether or not I should buy some SpaceX stock for my portfolio?

Staying inside my circle of competence

The first thing is Buffett’s embrace of the idea that as an investor you ought to stick to what you know about and can understand (your circle of competence).

SpaceX has multiple businesses in one – rocket building and launching, satellite wifi provision and social media.

Do I understand these businesses? Not as clearly as some, but I do feel I have a strong enough grasp of how they work that I can make an informed choice as to whether or not I ought to invest in SpaceX.

SpaceX is close to the edge of my circle of competence, but it is still inside it.

Spotting a great business

Is SpaceX the type of ‘great business’ in which Buffett likes to invest? I reckon the jury is out on that one — and may be for some time. The volatility of SpaceX stock since it listed a couple of months ago demonstrates that.

The company certainly has some aspects that could help make it a great business. For example, its know how and proprietary technology help give it a competitive advantage. In Buffett’s terminology, that is a ‘moat‘ – and it can help give a company pricing power.

SpaceX has other attractive attributes too, from a large addressable market to a sizeable installed user base for its Starlink satellite wifi service.

However, just as there is a difference between having flour and eggs and having a cake, there is a difference between having some helpful components for a successful business and actually having a successful business.

SpaceX may be very successful in future. But for now it is heavily lossmaking, faces well-funded competition in all of its business areas and has yet to prove that its commercial model can be profitable, let alone consistently so.

Paying the right price

Buffett does not just like to invest in great businesses. He specifically likes to invest in great businesses when he can do so at an attractive price. That is always a matter of judgement, of course, based on how an investor sees a company’s future prospects.

I explained above why for now at least, I do not yet see SpaceX as a great business. So in that sense, the price does not matter to me as I do not plan to invest.

Even if I did see it as a great business though, its current valuation looks unjustifiable to me. Its $1.9trn market capitalisation looks far too high given the company’s lack of profits and the risks it faces as it tries to grow at speed.

Fortunately, there are other growth shares in the market that I think can help me benefit from the Buffett approach – at far more attractive prices.

Should you invest £5,000 in SpaceX right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if SpaceX made the list?

Christopher Ruane does not hold any positions in the companies mentioned.