S&P turns up 33 Buffett-style stocks in the latest screen tracking the Berkshire Hathaway chief’s investing criteria

By Howard Silverblatt From Standard & Poor’s Equity Research

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Warren Buffett has earned a reputation as one of the preeminent value investors of all time. His Berkshire Hathaway (BRKA) holding company has stakes in insurance, publishing, retailing, and manufacturing, among other businesses, and its investment portfolio includes more than $76.0 billion (as of Sept. 30, 2008) of marketable equity securities.

However, like others in the financial-services industry, Berkshire Hathaway has been hurt by a challenging economic environment. In 2008, the shares registered a decline of 31.8%, outperforming the S&P 500, which implacable 37% for the year.

In recent months, Buffett disclosed he made investments, with a view to Berkshire Hathaway’s investment portfolio, in Dow Chemical (DOW), General Electric (GE), Burlington Northern Santa Fe (BNI), and Goldman Sachs (GS), among others.

The Method

But to what extent does Buffett represent his picks? What exactly is "Warren’s Way?" In his rare public remarks, and widely followed annual culture to Berkshire shareholders, Buffett makes it sound very simple: He says he buys stocks that are "available at a convinced excellence." In fact, Buffett uses very sophisticated screens to determine which companies belong in his portfolio.

Specifically, he uses these five investment criteria:

• Free cash flow (net gains after taxes, plus depreciation and amortization, less capital expenditures) of at minutest $250 the public.

• Net profit verge of 15% or more.

• Return onward equity of at least 15% for one and the other of the past three years and the most numerous recent quarter.

• A dollar’s worth of retained earnings creating at least a dollar’s worth of shareholder duration besides the past five years.

• Ample liquidity. Only shares by a market capitalization of at minutest $500 million are included.

In the Standard & Poor’s "Warren Buffett" screen, we added one in addition criterion to expel overvalued stocks. Overpriced stocks are identified by comparing our five-year discounted cash flow (DCF) estimate with the current price.

Original text: http://www.businessweek.com/investor/content/jan2009/pi20090115_839323.htm?campaign_id=rss_null