The Warren Buffett Way

Business Tenets:
1. Is the business simple and understandable?
2. Does the business have consistent operating history?
3. Does the business have favorable long-term prospects?
Management Tenets:
1. Is management rational?
2. Is management candid with the shareholders?
3. Does management resist the institutional imperative?
Financial Tenets:
1. What is the return on equity? [focus on return on equity, not earnings per share]
2. What are the company’s “owner earnings?” [calculate the “owner earnings” to get a
true reflection of value]
3. What are the profit margins? [look for companies with high profit margins]
4. Has the company created at least one dollar of market value for every dollar retained?
[for every dollar retained, has the company created at least a dollar of market value]
Value Tenets:
1. What is the value of the company?
2. Can it be purchased at a significant discount to its value?

*only buy a company in premium if it’s lead by a good management and goes with the tenets
written above.