How Does Buffett Quickly Analyze a Stock?#
When Buffett selects stocks, he typically filters companies by analyzing financial statements. In the book "Working with a Tap Dance," when a reporter asked Buffett about his source of inspiration, he replied: mainly relying on reading, with daily work involving a lot of reading. By reading annual reports, analyzing specific financial indicators, and conducting preliminary screenings.
1. Return on Equity (ROE)#
This indicator measures the efficiency of a company in using its capital, commonly calculated as ROE = Net Profit / Average Net Assets. Through the DuPont analysis, ROE can be broken down into three components: ROE = Net Profit Margin * Asset Turnover * Financial Leverage. It comprehensively reflects the operational status of a business, and Buffett believes ROE should be above 15%. The following analysis uses the financial reports of Kweichow Moutai for 2023 and 2024 as examples.
For example, Kweichow Moutai's ROE for 2023 and 2024 is 34.19% and 36.02%, respectively, an increase of 2 percentage points. Considering that the company holds a large amount of cash that is not effectively utilized, the ROE excluding cash in 2024 may approach 50%, indicating that Moutai can recover its investment cost within two years.
2. Gross Margin#
Gross Margin = (Operating Revenue - Operating Costs) / Operating Revenue, directly reflecting the profit space of a product. For example, if a product sells for 100 yuan and costs 40 yuan, the gross margin is 60%. Buffett requires a gross margin above 40%, as a high gross margin indicates that the product has unique advantages, a wide moat, and strong risk resistance.
The gross margins in China's liquor industry are generally high. For Kweichow Moutai, the gross margins for 2023 and 2024 are 92.11% and 92.01%, respectively, a year-on-year decrease of 0.1 percentage points.
3. Net Profit Margin#
Net Profit Margin = Net Profit / Operating Revenue, representing the actual profit after deducting all costs and expenses. A high gross margin can be eroded by management or sales expenses, leading to an unsatisfactory net profit margin. Buffett believes the net profit margin should be greater than 5%.
Taking Kweichow Moutai for 2023 and 2024 as examples, the net profit margins are 49.5% and 51.2%, respectively, a year-on-year increase of 1.7 percentage points, suggesting that management or sales expenses may have decreased.
These are three key criteria Buffett uses for stock selection, but company analysis also includes other indicators such as price-to-earnings ratio and differentiation.
Limited Time Offer - New Users Register to Receive a Guaranteed 20+ U Bitcoin Blind Box 🎁#
🎁 Register on mainstream exchanges such as OKX, Binance, Huobi, Bitget, Bybit, Gate, Backpack, etc., and bookmark all mainstream exchanges' latest anti-loss domain names on one page 👉🏻: https://mlink.cc
🔥 Solve the Problem of Inaccessibility to OKX, Binance, Huobi, and Other Exchanges in Mainland China#
Many exchanges' original domain names may be restricted or their servers located overseas, leading to access difficulties. Users often mistakenly believe that platform services are interrupted, but it is actually due to the network environment. To address this issue, exchanges like OKX and Binance regularly update backup domain names to ensure users can access the official website through alternative addresses.
Can't open the link? Try other domestic mirror lines! 👉🏻 OKX Domestic Backup Domain Name Line No VPN No Proxy
-
- OKX Backup Domain Overseas OKX - Requires VPN or Backup Link
-
- Binance Backup Domain Binance
-
- Bitget Backup Domain Bitget
-
- Bybit Backup Domain Bybit/Bybitglobal
-
- Huobi HTX Backup Domain Huobi (Huobi/HTX)
-
- Gate Backup Domain Gate.io (Open Sesame)
🔥 Related Reading#
🔥 Useful Tools for Finding Gold Dogs#
1️⃣ Axiom Dog-Charging Tool https://axiom.trade
2️⃣ Gmgn Dog-Charging Tool https://gmgn.ai
3️⃣ dbot Dog-Charging Tool https://app.debot.ai
4️⃣ Morelogin Multi-Account Fingerprint Browser www.morelogin.com
Everyone is Searching For#
Buying Bitcoin, Buffett Stock Selection, Bitcoin, President Coin, Trump Coin, Buying Bitcoin in China, Cryptocurrency Trading Exchanges, OKX Download Registration, Domestic OKX Recharge, Binance App Registration, Binance App Download, Binance Platform Buying Coin Tutorial, Binance Registration, Binance Airdrop Registration, Binance Apple Download, How to Buy President Coin, How to Buy Dogecoin, Buying Bitcoin with RMB, How to Download OKX, Web3 Earning, Web3 Zero Earning, Bitget Mainland Download Registration, OKX Passport Registration, OKX Download, Binance Download, Cryptocurrency Side Hustle, OKX Contracts, How to Recharge RMB on OKX, How to Recharge on OKX, How to Set Up an NFT Wallet, How to Recharge RMB on Huobi, Cryptocurrency Beginner's Tutorial, btc8848.com, Contract Trading Tony's Mindset, Contract Leverage Bit Wave, DeFi Mining, Cryptocurrency Earning, Can Cryptocurrency Airdrops Still Be Played, What to Do if a Contract is Liquidated, How to Buy President Coin on OKX and Binance, How to Buy Ethereum on OKX and Binance, How to Play DeFi Staking Mining, Can NFTs Still Be Played, How to Play Web3 Airdrop Earning, How to Strike Inscriptions, How to Strike Runes, Cryptocurrency Beginner's Entry, How to Trade Cryptocurrency, Can You Make Money Trading Cryptocurrency, Cryptocurrency Beginner's Tutorial btc8848.com, Can You Make Money Trading Cryptocurrency, What is Contract Leverage, DeFi Mining, How to Play Cryptocurrency Earning, OKX Airdrop, Node Staking, Liquidation, Financial Freedom, Night Investment heiyetouzi.xyz