Validea’s Warren Buffett strategy, also known as our “Patient Investor” strategy, is inspired by the investment principles of Warren Buffett, as interpreted from the book Buffettology by Mary Buffett. This strategy aims to emulate Buffett’s long-term, value-based approach to investing.
Buffett looks for companies with strong, stable earnings growth, conservative financing, high returns on equity, and shareholder-friendly management. Here are the details behind the key criteria in Validea’s Buffett model:
- Earnings Predictability: 10 years of consistently increasing annual EPS with no losses
- Return on Equity: 10-year average ROE of at least 15%, with each individual year above 10%
- Return on Total Capital: 10-year average ROTC of at least 12% for non-financial firms
- Free Cash Flow: Positive free cash flow indicates the company is not overextending itself
- Use of Retained Earnings: Management is earning at least a 12% return on retained earnings
- Debt: Long-term debt no more than 5 times annual earnings
If a company meets these strict fundamental standards, Buffett then looks to buy at an attractive price based on long-term valuation.
Here are the top ten highest scoring stocks for January 2025. The number of stocks meeting 100% of the strategies tests has risen this month, with Five Below, Lululemon and Lam Research added since last month .
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!
Further Research
