5 Ways Warren Buffet Uses To Identify Good Stocks

By SiliconIndia   |   Sunday, February 24, 2013
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Bangalore: Investment in stocks can make or break your life, so always invest carefully. You usually invest in stocks, by buying the shares of the company listed in the security exchange of a nation. In India, investors buy and sell their stocks through the Bombay Stock Exchange and National Stock Exchange. However, Warren Buffet, who is the known to be the greatest investors, has earned millions from investing in stocks from all over the world. He uses his mysteries and logical ways to identify the best stocks,   as stated in a book called "The New Buffettology", witten by Mary Buffett.

Here is the Warren's Checklist for Potential Investments:

Are the earnings of the company strong and showing an upward trend?

Buffett looks whether a company has a strong long-term growth as well as an indication of an upward trend. Looking at the 10-year history, and the 5-year history, he gets a good about the company’s performance in the market. If he finds that the company has suffered a loss for more than twice or thrice, or its earning has been reducing consistently for years together, he would never invest in such stocks.

More: 11 Secrets of the Super Rich

Proposed Criteria: It’s a positive sign if in the recent period, the company earnings have grown faster than the overall period. Even a consistent 10 years growth in Earnings Per Share (EPS), with ideally not more than 1 year of downfall and no negative EPS years, is one of his preferred stock.

Also Read: 10 Money Management Mistakes to Avoid

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