Everybody knows the brilliant investor Warren Buffett. He made billions out of pennies and became one of the most respected investors in the world.
Today I like to look deeper in the selection criteria and show you some stock ideas that might match his affords.
Billionaire Warren Buffett of Berkshire Hathaway seeks specific qualities in potential stock investments: an undervalued share price, an astute management, significant growth opportunities and a strong "moat" where the company can maintain a competitive advantage over its peers.
Those stocks have...
- Strong Cash Flows
- Little need for long-term debt (other than for purchasing other monopoly type businesses)
- Strong consistent upward trend in earnings and long-term price appreciation.
- Operating margins, net profit margins and return on equity are all above industry averages.
In addition, he wants to...
- Look for a history of increasing earnings for the company. The shorter term earnings trend (3-5 year) should be better than the longer term trend (5-10 years) taking the overall economic conditions into account. Buffett finds more success focusing on the longer three to five year averages as opposed to quarterly or yearly results.
- The company should have a strong and consistent return on equity that is achieved without excess leverage or tricky accounting.
Operating margins, net profit margins and return on equity should all be above the industry averages.
- The company should carry little long-term debt measured according to industry standards.
- Prefer companies that have been producing the same product or service for a number of years.
- Invest in companies that have historically used their cash flow in ways that benefit the company and shareholders. These can include stock repurchase plans, purchases of related monopoly type businesses or paying reasonable dividends.
- Prefer larger companies, 5 billion and up. They tend to have a longer track record of growth and are able to better weather any market downturns.
Let's take a look at five blue-chip giants that Buffett would have bought 40 years ago, but that still provide plenty of value, growth and income for nonbillionaires like us.
Here are some results that could meet Warren Buffett's investment criteria now...
Many individual investors count on dividend payments they receive for buying shares in certain companies. But with the S&P 500 Index yielding an average of only 2.1%, it is important income investors consider global stocks to maximize their total return.
Income-oriented investors, who focus only or primarily on the United States, are limiting themselves to one of the least dividend-rich stock markets to gain a secure income. This is not bad but abroad is also nice yields available which become higher when the dollar is falling one day. I believe that this will happen one day.
Attached, I've put a few high-quality dividend paying stocks from abroad that are listed in the United States. As of today, there are 886 foreign companies listed of which 398 pay a dividend. I cannot list of them here so I need to make a difference between them. I decided to list only stocks with a 2 billion+ market cap and a low forward P/E, expected earnings growth over 5% and solid debt ratios.
These stocks jumped into my eyes...
Growth is good especially when it comes on high-margin. Today I like to show you those stocks with the highest expected earnings per share growth for the next five years.
Each of the stocks has an operating margin over 15%. In addition, sales grew by more than 5 percent yearly in the past half decade.
Only 6 stocks fulfilled my criteria of which two paying yields over 6 percent. Attached you can also find a full list with more fundamentals. I hope it helps you do evaluate the stocks better.
Here are the results...
Benjamin Graham is the grandfather of value investing and mentor of Warren Buffett who become popular with his value orientated dividend growth approach.
One question I ask myself often is what stocks Benjamin Graham would find if my dividend growth screener doesn't deliver good results for long-term orientated income investors.
I found a great article on Value walk that discussed the Graham Approach and delivered nice results which I've attached for your research. I hope you will find some values in it and start deeper research.
My personal favorites are Valero, Sands China, Marathon Petroleum, Potash, Garmin and SJM. Which stocks do you prefer from the screen?
From inception during 2002 to date, the stocks qualifying for the screen have returned 15.6% per annum.
Here are the results...
March of next year will mark the seventh anniversary of the beginning of one of the longest bull market runs in history that came out of the Great Recession lows of March 2009.
While many claim that this has indeed been a secular bull market since then, the reality is that until the market blew past the double top level of 1,500 in May of 2013, we were really just filling in a monumental hole. With that in mind, the bull run is getting tired, and three very distinct signs of a market top are showing up.
So what do investors do with bond yields still at historical lows? It’s time to think about selling the high-beta momentum stocks that lurk in portfolios and move to more conservative blue chip companies that pay dividends.
Attached you can find a few ideas of stocks that pay good dividends and offer attractive yields while having low beta ratios.
These are the results....
