A Checklist For Picking Great Stocks - Warren Buffett Investing Cheat Sheet

[funksta3]

@giventothelord Then compare with index funds over 20-30 years

 

[ottomanscribe]

@irondad92 How valid is this list today?

I applied a few of the rules in a stock screener and arrived at just 11 companies: https://finviz.com/screener.ashx?v=111&f=fa\_pb\_u2,fa\_pe\_low,fa\_peg\_low,fa\_pfcf\_low,fa\_ps\_u2,fa\_roe\_verypos&ft=4

 

[irondad92]

@ottomanscribe I mentioned above, but the aim is not to find companies that fit every criteria. The aim is to build portfolios targeting individual checklists (factors). Just pick a few criteria, eg. build a value portfolio.

 

[maus]

@irondad92 Could you explain more about "portfolios targeting individual checklists (factors)"? How do you decide which criteria to include? Thanks!

 

[irondad92]

@maus First, decide which factors/checklist you want to target. eg. perhaps you want to create a value portfolio, and a quality portfolio. The best way to choose these factors is by looking at which factors are performing best right not.

Value and small cap tend to perform better during economic recovery.

Momentum tends to performs best during expansion.

Quality and Low Vol tend to perform best during slow down and during recessions/contraction.

So. Let's say you are creating a value portfolio. You look at my value checklist. And pick companies which fit most of the criteria. Using an online screener. Or Aikido Finance has pre-built value strategies.

 

[dustwake]

@ottomanscribe Lmao. Exactly what I expected. Small beaten down energy companies. Herp derp vermillion energy fits the bill that will prob have growth which exceeds next era energy or more reputable and well capitalized energy companies.

P/Es are fundamentally different now with changes in cost of capital. Relationship between P/E and growth is too strong. Amazon has a P/E of 57. Compare vermillions returns over the past 5 years. Not even close.

Things were different then in terms of trader information. Not so much now.

 

[arkay]

@ottomanscribe What were the 11 companies if you don't mind? When I go to load your link it has default settings. Thank you!

 

[ottomanscribe]

@arkay Sure thing.

Ticker
Company

ADES
Advanced Emissions Solutions, Inc.

ESGR
Enstar Group Limited

FL
Foot Locker, Inc.

NAVI
Navient Corporation

SC
Santander Consumer USA Holdings Inc.

SID
Companhia Siderurgica Nacional

TEF
Telefonica, S.A.

TROX
Tronox Holdings plc

TX
Ternium S.A.

VALE
Vale S.A.

VET
Vermilion Energy Inc.

 

[1ptpentecost]

@ottomanscribe Vale is my baby, that’s an excellent one. Very undervalued right now and a 20% dividend.

 

[healiheal777]

@irondad92 Thanks for all your hard work was looking for something like this.

As next steps any ideas on screeners where we can use these filters to identify the companies. Using this on few companies at random / by sector I know always raised flags in one of the areas.. Wondering if I will actually find a stock that meets these

 

[resjudicata]

@healiheal777 Finviz

 

[docwriter]

@resjudicata Tried. Only got as far as ROE > 30% and above. Found Foot Locker though, so that made feel better.

https://finviz.com/screener.ashx?v=..._low,fa_pfcf_u15,fa_ps_u2,fa_roe_verypos&ft=4

 

[%CE%A7%CF%81%CE%B9%CF%83%CF%84%CF%8C%CF%82]

@irondad92 Without even asking to see this actual filter in python I can tell from your returns that there is big time survivorship bias here.

 

[irondad92]

@%CE%A7%CF%81%CE%B9%CF%83%CF%84%CF%8C%CF%82 Delisted companies were included from the dataset. Compustat used from 1965 to 2009. Factset used from 2009 to present. We were careful about survivorship bias. The data is top-tier.

 

[%CE%A7%CF%81%CE%B9%CF%83%CF%84%CF%8C%CF%82]

@irondad92 If deliated companies are removed then your universe is only survived companies. That is survivorship bias.

 

[irondad92]

@%CE%A7%CF%81%CE%B9%CF%83%CF%84%CF%8C%CF%82 bahahah sorry, I meant included. I edited the comment. My apologies sir

 

[%CE%A7%CF%81%CE%B9%CF%83%CF%84%CF%8C%CF%82]

@irondad92 So what size company did you pick?

 

[missmango]

@irondad92 Thank you for the interesting checklist, OP. What guided the specific targets you put for each line of the checklists? Was that specified in the book you read?

Some of those indicators, particularly Price/Earnings ratio, have varied substantially regarding what is considered the norm of the past few decades. I recall a quote from an old 80's investing textbook stating that P/E over 14 is considered outlandish, but now a huge portion of major indices trade above that target.

 

[kobolt]

@irondad92 This is awful. You can’t just use number X as the end all be all of a particular metric when there are so many other factors such as economic, sectors, political, etc.

 

[klortch]

@irondad92 Y’all remember that story of the monkey and a dart board?