Friday, December 17, 2010

Warren Buffett Investment Criteria

Warren Buffet owned Berkshire Hathaway relies on extensive research-and-analysis team that goes through reams of data to guide their investment decisions. While all the details of the specific techniques used are not made public, the following 10 requirements are all common among Berkshire Hathaway investments:

1. The candidate company has to be in a good and growing economy or industry.

2. It must enjoy a consumer monopoly or have a loyalty-commanding brand.

3. It cannot be vulnerable to competition from anyone with abundant resources.

4. Its earnings have to be on an upward trend with good and consistent profit margins.

5. The company must enjoy a low debt/equity ratio or a high earnings/debt ratio.

6. It must have high and consistent returns on invested capital.

7. The company must have a history of retaining earnings for growth.

8. It cannot have high maintenance costs of operations, high capital expenditure or investment cash flow.

9. The company must demonstrate a history of reinvesting earnings in good business opportunities, and its management needs a good track record of profiting from these investments.

10. The company must be free to adjust prices for inflation.

For the followers of Warren Buffet in India the above criteria can be used to filter out companies in Indian Stock market.

On high level analysis one company which seems to satisfy most of the above criteria is Gillete India. There is barely any competition in the Razor market and the kind of brand value this company has, it has the capability to adjust prices for inflation as well.

1 comment:

  1. Gillete has appreciated more than 35% since this post... Happy buffett style Investing...


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