WARREN Buffett, the world’s greatest investor, loves value stocks – stocks that are trading below their intrinsic value. He uses investing tenets which are categorized in the areas of business, management, financial measures and value.
Value
Buffett seeks a company’s intrinsic (built in, inherent) value. He projects future earnings and discounts them back to the present. He looks for companies with a wide economic moat – something that gives a company a clear advantage over others and protects it against competition. Moat minimizes or even eliminates risk from competition. Think Amazon.
Business
Buffett adamantly restricts himself to businesses that he can understand and analyze. He considers this deep understanding of the operating business to be a prerequisite for a viable forecast of future business performance.
Management
Buffett looks for management that is rational, one that reinvests or returns money to shareholders in the form of dividends.
Finances
Buffett looks at Return on Equity (ROE), low leverage, high margins, and the company’s ability to generate cash flow. This is how he had made money as the greatest investor of all time.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.