Saturday, February 7, 2009

Waren Buffet advice for share market

Waren Buffet is the richest man of the world.He given some valuable advice for stock market as follows:

1.Is the company in an industry of good economics, i.e., not an industry competing on
price points. Does the company have a consumer monopoly or brand name that commands loyalty? Can any company with an abundance of resources compete successfully with the company?

2.Are the earnings on an upward trend with good and consistent margins?

3.Is the debt-to-equity ratio low or is the earnings-to-debt ratio high, i.e. can the company repay debt in few years from its earnings?

4.ROE is consistent over its history and high compared to industry averages? Is it more than 12%? Or does the company have high and consistent Return on total capital?
Does the company retain earnings for growth?

6.The business should not have high maintenance cost of operations, low capital expenditure or investment cash outflow. This is not the same as investing to expand capacity.

7.Does the company reinvest earnings in good business opportunities? Track record of management accomplishing these investments?

8.Is the company free to adjust prices for inflation

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