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," when asked about his source of inspiration, Buffett replied, "I read. My daily work is reading." He conducts preliminary screening by reading annual reports and analyzing specific financial metrics.
1. Return on Equity (ROE)#
Return on equity measures a company's efficiency in using capital, with the formula ROE = Net Profit / Average Net Assets. Through DuPont analysis, ROE can be broken down into net profit margin, asset turnover, and financial leverage, reflecting the overall operational status of the company. Buffett requires an ROE of over 15%. (Analysis based on Kweichow Moutai's 2023 and 2024 financial reports.)
For Kweichow Moutai, the ROE for 2023 and 2024 is 34.19% and 36.02%, respectively, an increase of 2 percentage points. Given the company's large amount of idle cash, the ROE after excluding cash in 2024 could reach around 50%, indicating that Moutai may recover its investment cost within two years.
2. Gross Margin#
The formula for gross margin is (Operating Revenue - Operating Cost) / Operating Revenue, reflecting the profit space of a product. For example, a product priced at 100 yuan with a cost of 40 yuan has a gross margin of 60%. Buffett prefers companies with a gross margin above 40%, as this indicates a unique product advantage, a wide economic moat, and strong risk resistance.
The Chinese liquor industry generally has high gross margins, with Moutai's gross margins for 2023 and 2024 being 92.11% and 92.01%, respectively, a year-on-year decrease of 0.1 percentage points.
3. Net Profit Margin#
The formula for net profit margin is Net Profit / Operating Revenue, representing the actual profit after deducting all costs. A high gross margin can be eroded by high management or sales expenses, leading to a low net profit margin. Buffett requires a net profit margin above 5%.
Moutai's net profit margins for 2023 and 2024 are 49.5% and 51.2%, respectively, an increase of 1.7 percentage points year-on-year, indicating that management or sales expenses may have decreased.
These are three key criteria Buffett uses for stock selection, but company analysis also includes factors like price-to-earnings ratio and differentiation.
Limited-Time Benefits - New Users Register to Receive a Guaranteed 20+ U Bitcoin Blind Box 🎁#
🎁 Register on mainstream exchanges like OKX, Binance, Huobi, Bitget, Bybit, Gate, Backpack, etc., and collect all the latest anti-loss domain names in one place 👉🏻: https://mlink.cc
🔥 Solving Access Issues for OKX, Binance, Huobi, and Other Exchanges in Mainland China#
🔥 Addressing the issue of users in mainland China being unable to access OKX, Binance, Huobi, etc.: Original domain names are often restricted or overseas servers cause slow access, leading users to mistakenly believe the platform is down, when in fact it is due to the network environment. Exchanges like OKX and Binance regularly update backup domain names to ensure access. Link expired? Try domestic mirror lines 👉🏻 OKX Domestic Backup Domain Name Line Without VPN or Proxy
-
- OKX Backup Domain: Overseas version 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)
🔥 Recommended Reading#
2025 Top Ten Virtual Currency Trading Platforms in China Latest Ranking 🔥【Must-Collect】
Real Stories of Getting Rich in the Crypto World: From 0 to 11 Million and Then to a Debt of 100,000
🔥 Useful Tools for Alpha Finding#
1️⃣ Axiom Dog-Chasing Tool: https://axiom.trade
2️⃣ Gmgn Dog-Chasing Tool: https://gmgn.ai
3️⃣ dbot Dog-Chasing Tool: https://app.debot.ai
4️⃣ Morelogin Multi-Account Fingerprint Browser: www.morelogin.com
Popular Searches#
Buying Bitcoin, Buffett Stock Selection, Bitcoin, Trump Coin, Buying Bitcoin in China, Trading Exchanges, OKX Download Registration, Domestic OKX Recharge, Binance App Registration, Binance App Download, Binance Platform Buying Guide, Binance Registration, Binance Airdrop Registration, Binance Apple Download, How to Buy Trump 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, 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 Guide to Crypto, btc8848.com, Trading Contracts Tony's Insights, Contract Leverage Bit Wave, DeFi Mining, Crypto Earning, Can Crypto Airdrops Still Be Played, What to Do if Contract Liquidation Happens, How to Buy Trump 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, Crypto Beginner's Guide, How to Trade Crypto, Can You Make Money Trading Crypto, Crypto Beginner's Guide btc8848.com, Can You Make Money Trading Crypto, What is Contract Leverage, DeFi Mining, How to Play Crypto Earning, OKX Binance Airdrop, Node Staking, Liquidation, Financial Freedom, Night Investment heiyetouzi.xyz