Warren Buffett’s approach to investing rests on a core belief developed through years of experience: purchasing outstanding companies at reasonable prices beats buying mediocre firms at bargain rates. He looks for businesses with lasting competitive strengths—what he calls “economic moats”—that can maintain superior returns over many years. Instead of following market trends or chasing speculative plays, Buffett focuses on well-managed companies that produce steady earnings and dependable cash generation at rational valuations.
The Validea Warren Buffett model converts these proven principles into a structured system for finding high-quality businesses. Drawing from Mary Buffett’s “Buffettology,” this quantitative method transforms Buffett’s investment philosophy into specific financial measurements that identify companies with lasting competitive strengths and consistent operational performance.
Stable earnings serve as the foundation of this model, demanding continuous profit increases over ten full years without any losses. This strict standard mirrors Buffett’s preference for businesses that maintain profitability through various economic cycles.
The assessment process includes rigorous profitability standards, requiring average return on equity of no less than 15% over a decade, with each individual year staying above 10%. For companies outside the financial sector, the model also demands average returns on total capital above 12% during this timeframe, confirming that management uses resources effectively.
Financial strength plays a major role, with requirements for positive free cash flow to validate operational health and restrictions on long-term debt to maximum five times yearly earnings to maintain balance sheet stability. The model evaluates management competency by examining how they reinvest retained profits, specifically requiring at least 12% returns on these funds to prove effective capital allocation.
Valuation factors only come into play after companies meet these thorough quality standards. Following Buffett’s approach, the model stresses patient waiting for favorable buying opportunities, reflecting his belief that acquiring quality enterprises at fair prices surpasses chasing speculative investments or following market fads.
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 August 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 | $300.44 | $121,768 | 30.1 | 5.9 | 71 | 19.7 | 1 | 76.0% | 68.6% |
| AMAT | APPLIED MATERIALS INC | 100 | $179.99 | $144,442 | 21.9 | 5.1 | 48 | 7.6 | 5 | 36.4% | 38.9% |
| ASML | ASML HOLDING NV (ADR) | 100 | $689.82 | $267,487 | 23.8 | 7.2 | 38 | 12.5 | 3 | 54.1% | 60.1% |
| GWW | WW GRAINGER INC | 100 | $932.44 | $44,794 | 23.8 | 2.6 | 55 | 12.9 | 4 | 57.2% | 43.1% |
| KLAC | KLA CORP | 100 | $886.64 | $117,250 | 29.2 | 9.7 | 73 | 25.0 | 3 | 100.8% | 53.4% |
| LRCX | LAM RESEARCH CORP | 100 | $96.37 | $122,268 | 23.2 | 6.6 | 72 | 12.4 | 6 | 58.2% | 45.1% |
| NTES | NETEASE INC (ADR) | 100 | $127.31 | $80,612 | 18.3 | 5.4 | 83 | 4.0 | 2 | 23.9% | 21.3% |
| NVO | NOVO NORDISK A/S (ADR) | 100 | $48.19 | $160,102 | 13.2 | 3.4 | 17 | 7.3 | 1 | 88.1% | 100.5% |
| NEU | NEWMARKET CORP | 100 | $699.86 | $6,576 | 13.9 | 2.4 | 77 | 4.1 | 7 | 33.6% | 29.8% |
| TSCO | TRACTOR SUPPLY CO | 100 | $57.63 | $30,556 | 28.4 | 2.0 | 70 | 12.3 | 8 | 45.3% | 20.1% |
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