Want to be like Warren Buffett, Goldman Sachs saviour, Oracle of Omaha and all-around philanthropic finance extraordinaire?
Saving you the £12.50 on Snowball: Warren Buffett and the Business of Life (the first Buffett biography written with the cooperation of the man himself - serialised in the weekend FT), are JP Morgan’s European quants, who’ve boiled the billionaire’s investment strategy down to six key points:
Buffet seems to be following when taking corporate stakes:
1. Market Cap is in the top 30%
2. ROE has been greater then 15% for the past 3 years
3. Free Cash Flow per share is in the top 30%
4. The Net Profit Margin is greater then the Industry Average
5. The 5 years Forward Cash Flow per share is greater then the current share price
6. The change in Price is greater than the change in Book Value (year on year)
Buffett’s system of “hold and buy” has had an average annual return rate of about 22 per cent, according to the JPM quants, beating the S&P 500 by almost 12 per cent this year. He doesn’t do market timing, of couse, preferring instead to find companies trading below what he thinks is their intrinsic value. Apparently that includes Goldman Sachs (as long as there’s a bailout to go with it).
