How Does Buffett Quickly Analyze a Stock?#
When selecting stocks, Buffett typically filters companies by analyzing financial statements. In the book "Working with a Tap Dance," he mentioned that when asked about his source of inspiration, he replied: mainly relying on reading, with his daily work involving a lot of reading. By reading annual reports, analyzing key financial indicators, and conducting preliminary screenings.
1. Return on Equity#
This indicator reflects the efficiency of a company in utilizing capital, commonly calculated using the formula ROE = Net Profit / Average Net Assets. Through the DuPont analysis, it can be broken down into three components: ROE = Net Profit Margin * Asset Turnover * Financial Leverage, comprehensively reflecting the operational status of the enterprise. Buffett believes that the return on equity should be above 15%. The following analysis references the financial data of Kweichow Moutai for 2023 and 2024.
For example, Kweichow Moutai's return on equity for 2023 and 2024 is 34.19% and 36.02%, respectively, an increase of 2 percentage points. However, considering that the company holds a large amount of cash that has not been effectively utilized, the return on equity after deducting cash in 2024 may approach 50%. This means that Moutai can recover its initial investment cost within two years.
2. Gross Margin#
Gross Margin = (Operating Income - Operating Costs) / Operating Income, directly reflecting the profit space of the 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 economic moat, and strong risk resistance.
In the Chinese liquor industry, gross margins are generally high. Taking Moutai as an example, 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 Margin#
Net Margin = Net Profit / Operating Income, representing the actual profit received after deducting all costs and expenses. If a company has a high gross margin but excessive management or sales expenses, it will erode profits, leading to poor net margins. Buffett believes that the net margin should be greater than 5%.
For Kweichow Moutai in 2023 and 2024, the net margins are 49.5% and 51.2%, respectively, an increase of 1.7 percentage points year-on-year. This indicates that Moutai may have reduced its management or sales expenses.
These are the three core criteria Buffett uses for stock selection, but company analysis also includes other indicators such as price-to-earnings ratio and differentiation.
🔥🔥🔥 Alpha's Practical 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
Related Reading#
The Latest Ranking of China's Top 10 Virtual Currency Trading Platforms for 2025 is Out 🔥【Worth Collecting】
【Real Stories of Getting Rich in the Coin Circle】Many people ask me, after years of trading coins, how did I go from 0 to 11 million and then to a debt of 100,000?
Everyone is Searching For#
Bitcoin purchase, Buffett stock selection, Bitcoin, President Coin, Trump Coin, domestic Bitcoin purchase, coin trading platforms, OKX download registration, domestic OKX recharge, Binance App registration, Binance App download, Binance platform coin purchase tutorial, Binance registration, Binance airdrop registration, Binance Apple download, how to buy President Coin, how to buy Dogecoin, RMB purchase of Bitcoin, how to download OKX, web3 airdrop, web3 zero airdrop, Bitget mainland download registration, OKX passport registration, OKX download, Binance download, coin trading side business, 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, beginner's tutorial for the coin circle, btc8848.com, Tony's mindset for trading contracts, contract leverage bit wave, DeFi mining, coin circle airdrop, can airdrops still be played in the coin circle, 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 and mining, can NFTs still be played, how to play web3 airdrop, how to hit inscriptions, how to hit runes, beginner's guide to the coin circle, how to trade coins, can trading coins make money, beginner's tutorial for the coin circle btc8848.com, can trading coins make money, what is contract leverage, DeFi mining, how to play airdrops in the coin circle, OKX airdrop, node staking, liquidation, financial freedom, night investment heiyetouzi.xyz