Howdy money people. Let me guide you through the process of how to pick a Buffett stock.
STEP 1: (takes 5 minutes) Look for good companies.
To assess this, I set of 20 odd criteria that need to be fulfilled. Here is a screenshot:
If course, each of these criteria are based on calculations. I just cut and paste here how I assess ‘owners earnings are growing’ (…and in the case of Skyworks, they are growing with 41%).
All of these data you get from Google finance.
STEP 2: (takes 0 minutes – its automatic in my Excel sheet) If and only if you have a good company, then you calculate the stock price using discounted cash flow.
Add a margin of safety, and voila, buy only and only if the price is below your margin of safety price, and sell when the price is at 95% of the ‘real’ stock price.
See the screenshot below. Skyworks is worth 325 USD. I buy if lower than 168 USD, and sell at 319 USD.
Here is my super-duper excel sheet, but I removed the formulas. Feel free to download, and if you are interested, I can send you the excel template with all the formulas.