Warren Buffett's Investing Checklist

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Warren Buffett's Investing Questions

Before Warren Buffett invests a dime, he asks:

• Is the company in an industry with good economics? That is, is it not in an industry competing on price?
  
  
• Does the company have a consumer monopoly or brand name that commands loyalty?
  
  
• Can anyone with an abundance of resources compete successfully with the company?
  
  
• Are the earnings on an upward trend with good and consistent profit margins?
  
  
• Is the debt-to-equity ratio low, or is the earnings-to-debt ratio high? Can the company repay debt even in years when earnings are lower than average?
  
  
• Does the company have high and consistent returns on invested capital?
  
  
• Does the company retain earnings for growth?
  
  
• Does the business have high maintenance cost of operations, high capital expenditure or investment cash outflow? (If so, that's not good.)
  
  
• Does the company reinvest earnings in good business opportunities? Does management have a good track record of profiting from these investments?
  
  
• Is the company free to adjust prices for inflation?

In short, he makes companies jump through a lot of hoops before he considers putting them in his portfolio.

Source : InvestmentU