Warren Buffett’s investment philosophy rests on a principle honed over decades: it is better to own outstanding businesses at fair prices than mediocre ones at deep discounts. He favors companies with durable competitive advantages—his well-known “economic moats”—that can deliver superior returns for many years. Instead of chasing market fads or speculation, Buffett focuses on firms run by capable leaders who consistently generate profits and cash flow, all purchased at sensible valuations.
The Validea Warren Buffett model adapts these enduring principles into a systematic process for identifying exceptional businesses. Drawing on Mary Buffett’s Buffettology, this quantitative framework translates Buffett’s wisdom into concrete financial tests designed to highlight companies with lasting competitive strength and reliable execution.
At its core, the model demands earnings consistency: at least ten straight years of profits, with no annual losses. This reflects Buffett’s preference for firms that remain profitable through all economic cycles.
Profitability standards are equally rigorous. Companies must maintain an average return on equity of 15% or more over a decade, with no single year dropping below 10%. Non-financial firms must also post average returns on total capital above 12%, ensuring management allocates resources effectively.
Financial strength is another key filter. Firms must generate positive free cash flow, while long-term debt cannot exceed five times annual profits, safeguarding balance sheet resilience. Management quality is judged by how effectively they reinvest retained earnings—requiring returns of at least 12% on these funds to prove disciplined capital allocation.
Only after these stringent quality hurdles are met does valuation come into play. In line with Buffett’s philosophy, the model emphasizes patience—waiting for opportunities to buy superior businesses at fair prices rather than pursuing speculative trades or following market trends.
Discover how Validea’s Warren Buffett-inspired ‘Patient Investor’ strategy can help you identify high-quality, long-term investments even in changing market conditions. Visit Validea.com to access in-depth stock analysis and tools designed to emulate Buffett’s proven investment principles. Start investing like the Oracle of Omaha today!
Here are the top ten highest scoring stocks according to Validea’s Buffett model for September of 2025.
| Ticker | Company Name | Patient Investor | Price | Market Cap ($mil) | PE Ratio | Price/ Sales | Relative Strength | Price/ Book | Quality Percentile | Return on Equity | Return on Capital |
|---|---|---|---|---|---|---|---|---|---|---|---|
| ADP | AUTOMATIC DATA PROCESSING INC | 100 | $304.05 | $122,764 | 30.5 | 6.0 | 65 | 19.9 | 1 | 76.0% | 66.6% |
| AMAT | APPLIED MATERIALS INC | 100 | $160.76 | $130,960 | 19.7 | 4.6 | 36 | 6.8 | 5 | 35.6% | 39.3% |
| ASML | ASML HOLDING NV (ADR) | 100 | $742.62 | $299,918 | 26.1 | 8.0 | 36 | 13.7 | 3 | 54.1% | 61.1% |
| GWW | WW GRAINGER INC | 100 | $1,013.50 | $48,524 | 25.6 | 2.8 | 59 | 13.2 | 4 | 55.3% | 42.3% |
| KLAC | KLA CORP | 100 | $872.00 | $117,299 | 29.4 | 9.7 | 64 | 25.2 | 3 | 100.8% | 52.9% |
| LRCX | LAM RESEARCH CORP | 100 | $100.15 | $131,207 | 25.0 | 7.1 | 74 | 13.4 | 6 | 58.2% | 45.1% |
| NEU | NEWMARKET CORP | 100 | $826.96 | $7,746 | 16.3 | 2.8 | 82 | 4.8 | 7 | 33.6% | 29.5% |
| NTES | NETEASE INC (ADR) | 100 | $136.19 | $85,528 | 18.4 | 5.6 | 87 | 4.2 | 2 | 24.4% | 21.8% |
| NVO | NOVO NORDISK A/S (ADR) | 100 | $56.46 | $190,443 | 14.4 | 3.9 | 16 | 9.5 | 1 | 79.2% | 88.7% |
| PAYC | PAYCOM SOFTWARE INC | 100 | $227.15 | $12,698 | 30.5 | 6.5 | 80 | 7.1 | 1 | 25.8% | 26.4% |
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