Want to rival the performance of the Oracle of Omaha? Here are 13 characteristics that Warren Buffett looks for in a potential investment:
- Strong and consistent financial performance: Buffett looks for companies with a track record of strong financial performance, including strong revenue and earnings growth, as well as a solid balance sheet.
- Durable competitive advantage: Buffett seeks out companies with a unique advantage that allows them to consistently outperform their competitors, such as a strong brand, a large market share, or a proprietary technology.
- Competent and shareholder-oriented management team: Buffett values companies with management teams that are transparent, honest, and focused on maximizing shareholder value.
- Reasonable price: Despite his focus on long-term growth, Buffett is also mindful of valuation and looks for companies that are trading at a reasonable price relative to their intrinsic value.
- Strong returns on capital: Buffett looks for companies that are able to generate strong returns on the capital they invest, as this indicates that they are using their resources efficiently and effectively.
- Good cash flow: Buffett looks for companies with strong and consistent cash flow, as this is a key indicator of financial stability and the ability to pay dividends and fund future growth.
- Strong balance sheet: Buffett values companies with a strong balance sheet, including low levels of debt and a solid financial position.
- Simple and easy-to-understand business model: Buffett prefers companies with a straightforward and easy-to-understand business model, as this makes it easier to evaluate the company’s prospects and potential risks.
- Wide moat: Buffett looks for companies with a “wide moat,” or a strong competitive advantage that makes it difficult for competitors to gain market share.
- Potential for long-term growth: Buffett looks for companies with the potential for long-term growth, as he is a long-term investor who seeks out businesses that have the potential to grow and prosper over the long haul.
- Strong brand and reputation: Buffett values companies with a strong brand and reputation, as this can be a powerful competitive advantage and can help to attract and retain customers.
- History of shareholder-friendly policies: Buffett looks for companies that have a history of being shareholder-friendly, such as paying dividends or buying back shares, as this can be a sign of a management team that is focused on maximizing shareholder value.
- Diverse customer base: Buffett also looks for companies with a diverse customer base, as this can help to reduce the risk of relying on a single customer or market segment.