The most famous “graduate” of the Benjamin Graham School of value investing, which looks for stocks with unjustifiably low prices in relation to their intrinsic worth.Once Buffett determines the intrinsic value of the company, he compares it to its current market capitalisation – which is the current total price. If his measurement of intrinsic value is 25 per cent higher than the extant market capitalisation, Buffett sees value. Sounds easy, doesn’t it?Well, Buffett’s success, depends on his unmatched skill in accurately determining this intrinsic value. While we can outline some of his criteria, we have no way of knowing exactly how he gained such precise mastery of calculating value.Buffett is a focus-investor, preferring narrow portfolio with a high concentration of FMCG and consumer brands, along with interests in insurance.His holding company, Berkshire Hathaway is the biggest insurer in the world. Buffett famously avoids technology stocks despite a personal regard for Bill Gates. He doesn’t like IPOs either.
1. How long has the company been listed?2. Is the stock selling at 25% discount to intrinsic real value?3. Are profit margins high? Are they increasing?4. Has the company minimised debt?
5. Has the company consistently delivered high return on equity?
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