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How To Screen For Stocks Like Warren Buffett

How To Screen For Stocks Like Warren Buffett

. 4 min read

Finding Stocks at a Reasonable Price

There are several Warren Buffett stock screeners available across the internet as well as theories on how he goes about selecting stocks. He’s watched by millions of investors from around the world looking for clues and insights into his strategy. However, one theme that everyone seems to agree with is that Warren Buffett looks to buy quality businesses at reasonable prices. So what does that mean and how do you screen for it?

There are various sources describing how Buffett finds quality businesses (i.e. AAII, ValueWalk) and they all typically follow the recommendations from the book Buffettology. But how do you figure out if a stock is trading at a reasonable price? This is what's lacking in most Warren Buffett stock screeners. Their approach to determining a "reasonable price" (specifically: stock valuation) is inadequate. Did Warren Buffett really accumulate a net worth of over $60 billion by valuing stocks based solely on historical earnings growth, earnings yield and average return on equity? Unlikely.

Warren Buffett Margin Of Safety quote

Fundamental analyses such as a Discounted Cash Flow (DCF) or a Dividend Discount Model (DDM) are the most widely accepted valuation methodologies because of their forward-looking nature. These analyses produce arguably the closest thing to an intrinsic stock value that ultimately helps you understand your margin of safety. Many investors already know this but do not typically apply these valuation approaches due to the amount of time it takes to build such models. Who really has the time and resources to build valuation models for thousands of companies?

Well, Mr. Analyst at does this for you by building over 100,000 financial models for over 5,000 companies every 12 hours. You can screen finbox fair value estimates that are calculated from pre-built valuation models. Now you can actually find stocks that Warren Buffett would consider "reasonably priced."

Warren Buffett Stock Screen

Warren Buffett Stock Screener Criteria

Criteria #1: 7yr Net Income CAGR > 6%
Buffett invests only in a business whose future earnings are fairly predictable.

Criteria #2: 3yr Net Income CAGR > 7%
Buffett invests only in a business whose earnings also show indications of an upward trend.

Criteria #3: ROE > 9%
Buffett believes that an above average return on equity may be an indicator that the company has a durable competitive advantage.

Criteria #4: ROIC > 6%
Buffett does not like debt and does not like to invest in companies that have too much debt. He acknowledges the use of debt can effectively increase a company’s ROE (see our DuPont model) which is why this criterion is added.

Criteria #5: Capex Margin < 4%
Buffett likes companies that do not have major capital expenditures. He looks for companies that do not need to spend a high percentage of revenues on major PP&E upgrades to stay competitive.

Criteria #6: Net Income Margin > 4%
Buffett believes a high margin may be a helpful indicator for excluding commodity-based companies.

Criteria #7: finbox fair value upside estimate > 10%
Use pre-built valuation models to figure out if a stock is reasonably priced. A screen only available for members!

13 stocks currently fit the above criteria as of October 12, 2017. The latest results can be viewed here. In addition, analysts can always view what stocks Warren Buffett currently owns.

Berkshire Hathaway's Largest Stock Holdings

On August 14th, 2017, Buffett's firm Berkshire Hathaway filed its quarterly Form 13F regulatory filing. The firm's stock portfolio totals over $160 billion according to the latest filing.

The following table summarizes Berkshire Hathaway's largest stock holdings reported in the last filing:

Ticker Name Holding ($mil) % Of Portfolio
KHC Kraft Heinz 27,887.4 17.2%
WFC Wells Fargo 25,931.2 16.0%
AAPL Apple 18,750.2 11.6%
KO Coca-Cola 17,940.0 11.1%
AXP American Express 12,771.7 7.9%
IBM International Business Machines 8,319.8 5.1%
PSX Phillips 66 6,672.2 4.1%

As we recently highlighted in our Ray Dalio review, doing thorough research on the thousands of stocks listed on U.S. exchanges is likely impossible for small investors. It is wise to leverage the resources from larger investors and hedge funds in order to help narrow down a watch-list.

This can easily be done using the Ideas Section of which tracks top investors and trending investment themes. You can get the latest data on the holdings discussed above here.

Happy Fin-vesting!


Note this is not a buy or sell recommendation on any company mentioned.