If Warren Buffett looks at Indian Stocks what will be his
choice? These are the stocks that common men should track. Tracking such
stocks will help people to time their purchases. Buying fundamentally
strong stocks at right time is the strong point of Warren Buffett. His success
can be attributed to his ability to repeatedly identify such stocks. What is
the secret of Warren Buffett’s phenomenal success? Frankly speaking, there is
no magic wand with Warren Buffett that made him so successful in investing. What
he has is a spectacular business mind. In his mind, he churns easy to
follow stock screeners. In this article we will unearth stock screeners of
Warrant Buffett. Warren Buffett will only buy fundamentally super-strong stocks
at undervalued price. The way he identifies fundamentally strong stocks is what
makes him so successful. Buffett never buy stocks that everybody is buying.
Instead he will buy that stock that has potential but is not in lime-light. In
short, Buffett likes non-popular stocks.
In concept, Warren Buffett will buy stocks which has
following characteristics
- Strong Balance Sheet & Profit & Loss Accounts
- Healthy Cash Flow
- Strong Top Management of Company
- Understandable Business Process
- Enjoys Competitive Advantage
Warren Buffett specially likes companies with
competitive advantage. In Warren Buffett terms such companies is said to
enjoy competitive moat. Companies which have majority market share in its
sector in terms of sales turnover is said to enjoy moat. So for us the first
step is to identify companies which are sector leaders. Just looking at
high sales turnover is not enough. Identifying sector leaders and tracking them
is essential.
Competitive advantage of company can also be gauged by
looking at its profitability. By profitability I mean EBITDA margins. Companies
which are sector leaders and also displays high EBITDA margins are
super-liked by Buffett. For a common man the starting point of preparing a list
of Warren Buffett type Indian stocks is look at these two parameters:
- Sector Leaders
- And their EBITDA margins
If you are like Buffett you would like to buy stocks of
companies from this list only.
But before one goes ahead and buy these stocks other
financial parameters needs to be checked.
Other parameters based on which Warren Buffett further
screens stocks are like this:
§ Warren Buffett will look into Earning Per
Share (EPS). In last 10 years EPS growth shall at least beat inflation. In no
year EPS shall be negative. The higher EPS growth the better.
§ Warren Buffett will look into Debt to
Earning Ratio (DER). Generally investors compare debt to equity.
But Warren
Buffett likes to compare Debt to Earning. Why? Because he wants to see
companies which carry less debt. He likes such companies which can pay-off all
of its long term debt in five years. Means, companies will DER of less
than 5 are preferred.
§ Warren Buffett will look into Return on
Capital Employed (ROCE).Idea is to see how profitable company is using employed
capital to generate profits. Total capital employed is total equity + total
debt. Average ROCE shall be more than 10% per annum/inflation.
§ Companies having positive Free Cash Flow are
liked by Buffett.
Selective
Indian Stocks Warren Buffett Way
(As of May’2014)
|
SL
|
Company
|
Market Price (Rs.)
|
Market cap (Rs Cr.)
|
EPS Growth % (CAGR 3 Yr)
|
RoCE in %
|
FCF Per Share
|
FCF Growth % (CAGR 5 Yr)
|
|
1
|
VST Industries Ltd
|
1,923.00
|
2,969.50
|
26.72
|
50.67
|
46,108.84
|
21.66
|
|
2
|
Kewal Kiran Clothing Ltd
|
1,258.15
|
1,550.67
|
17.99
|
24.93
|
26,430.81
|
122.03
|
|
3
|
Nestle India Ltd
|
4,768.50
|
45,975.97
|
10.92
|
36.26
|
15,665.47
|
25.46
|
|
4
|
Benares Hotels Ltd
|
616.05
|
80.09
|
31.54
|
31.88
|
43,373.44
|
55.26
|
|
5
|
Bajaj Finance Ltd
|
1,901.85
|
9,536.26
|
69.64
|
12.50
|
1,107.53
|
100.00
|
|
6
|
Disa India Ltd
|
3,409.70
|
514.86
|
8.87
|
30.60
|
599,281.14
|
64.11
|
|
7
|
Bata India Ltd
|
1,029.65
|
6,616.94
|
26.00
|
15.84
|
10,621.97
|
41.72
|
|
8
|
Tide Water Oil Co Ltd
|
8,019.25
|
698.48
|
2.88
|
25.27
|
2,450,776.32
|
57.01
|
|
9
|
Indag Rubber Ltd
|
325.95
|
171.12
|
29.23
|
40.47
|
3,483.39
|
42.56
|
|
10
|
JSW Holdings Ltd
|
631.00
|
700.41
|
70.45
|
3.82
|
17,236.41
|
46.02
|
|
11
|
Finolex Cables Ltd
|
153.40
|
2,346.08
|
36.09
|
11.24
|
219.10
|
105.65
|
|
12
|
Petronet LNG Ltd
|
143.75
|
10,781.25
|
41.64
|
22.13
|
11.48
|
16.90
|
|
13
|
Colgate-Palmolive Ltd
|
1,415.05
|
19,243.69
|
5.48
|
120.93
|
4,351.27
|
12.60
|
|
14
|
Fag Bearings India Ltd
|
2,200.00
|
3,655.74
|
0.09
|
10.73
|
51,103.37
|
125.07
|
|
15
|
Indraprastha Gas Ltd
|
288.30
|
4,036.20
|
18.01
|
29.17
|
305.98
|
17.96
|
|
16
|
Fluidomat Ltd
|
103.15
|
50.82
|
38.76
|
41.62
|
1,966.71
|
32.80
|
|
17
|
Gujarat Intrux Ltd
|
111.90
|
38.44
|
100.59
|
37.85
|
2,692.82
|
18.62
|
|
18
|
Sanofi India Ltd
|
3,023.25
|
6,962.85
|
4.75
|
21.58
|
93,142.16
|
0.52
|
|
19
|
Cummins India Ltd
|
539.50
|
14,954.94
|
7.13
|
31.13
|
970.91
|
16.30
|
|
20
|
NMDC Ltd
|
149.75
|
59,371.62
|
22.53
|
25.60
|
7.81
|
4.07
|
|
21
|
Selan Explorations Technology Ltd
|
557.45
|
914.22
|
12.88
|
24.25
|
6,937.94
|
14.25
|
|
22
|
TTK Healthcare Ltd
|
521.35
|
404.88
|
15.86
|
17.77
|
16,275.80
|
25.19
|
|
23
|
Vesuvius India Ltd
|
522.60
|
1,060.67
|
10.08
|
20.60
|
6,862.08
|
28.19
|
|
24
|
Jenburkt Pharmaceuticals Ltd
|
103.70
|
48.21
|
18.06
|
21.58
|
5,001.72
|
98.37
|
|
25
|
IFB Agro Industries Ltd
|
196.30
|
183.87
|
74.03
|
22.82
|
3,240.85
|
10.86
|
|
26
|
Stovec Industries Ltd
|
471.05
|
98.36
|
13.64
|
20.18
|
30,025.45
|
33.70
|
|
27
|
Dewan Housing Finance Corporation Ltd
|
229.40
|
2,945.95
|
24.25
|
10.75
|
136.46
|
51.53
|
|
28
|
Ratnamani Metals & Tubes Ltd
|
238.30
|
1,112.46
|
18.23
|
23.47
|
322.03
|
13.82
|
|
29
|
Igarashi Motors India Ltd
|
167.35
|
509.50
|
74.53
|
21.30
|
1,009.95
|
7.57
|
|
30
|
Vardhman Holdings Ltd
|
565.00
|
180.35
|
16.05
|
5.94
|
36,152.32
|
76.88
|
|
31
|
VST Tillers Tractors Ltd
|
1,022.30
|
883.27
|
4.69
|
14.63
|
57,804.05
|
20.09
|
|
32
|
Mazda Ltd
|
145.20
|
61.83
|
8.78
|
26.83
|
1,961.21
|
101.95
|
|
33
|
EIH Associated Hotels Ltd
|
152.00
|
463.11
|
35.56
|
15.25
|
528.82
|
21.71
|
|
34
|
Repco Home Finance Ltd
|
386.35
|
2,401.59
|
10.78
|
9.98
|
1,476.71
|
50.18
|
|
35
|
Ingersoll-Rand (India) Ltd
|
452.25
|
1,427.66
|
18.03
|
5.71
|
5,380.95
|
16.94
|
|
36
|
Linkson International Ltd
|
257.55
|
85.04
|
36.33
|
2.30
|
4,863.05
|
57.89
|
|
37
|
Rajesh Exports Ltd
|
124.10
|
3,664.18
|
26.82
|
12.32
|
5.41
|
12.29
|
|
38
|
Akzo Nobel India Ltd
|
859.50
|
4,010.43
|
2.73
|
13.65
|
9,020.03
|
11.55
|
|
39
|
Cheviot Company Ltd
|
310.85
|
140.22
|
23.23
|
11.20
|
3,948.82
|
22.72
|
|
40
|
Rasoi Ltd
|
380.00
|
73.42
|
26.44
|
3.79
|
12,043.37
|
22.03
|
|
41
|
State Bank of Bikaner and Jaipur
|
364.05
|
2,548.35
|
4.65
|
6.27
|
61.70
|
157.51
|
|
42
|
Josts Engineering Company Ltd
|
274.40
|
20.99
|
12.53
|
15.28
|
117,649.00
|
1.64
|
|
43
|
Sandesh Ltd
|
302.75
|
229.15
|
20.58
|
16.60
|
1,655.96
|
0.61
|
|
44
|
G M Breweries Ltd
|
132.20
|
123.71
|
1.14
|
22.26
|
624.62
|
45.10
|
|
45
|
Gujarat Alkalies & Chemicals Ltd
|
174.80
|
1,283.68
|
11.05
|
15.54
|
147.64
|
6.77
|
|
46
|
Gujarat Hotels Ltd
|
137.00
|
51.90
|
10.14
|
17.58
|
9,826.70
|
2.85
|
|
47
|
Can Fin Homes Ltd
|
235.70
|
482.83
|
11.36
|
8.85
|
697.66
|
18.56
|
|
48
|
GIC Housing Finance Ltd
|
118.85
|
640.02
|
8.22
|
10.37
|
34.47
|
0.82
|
