Expanding the Universe

Taking lessons from writing this newsletter and applying it to idea generation.

Meditations by Marcus Aurelius is one of the earliest works on self-improvement. English Translation by Meric Casaubon, 1635

I had a minor epiphany while writing about FTI Consulting (NYSE: FCN) last week. It was the kind of business I rarely found using the methods I deploy to screen for new ideas and potential investments.

Call it an investing “blind spot”.

So, I thought it would be apt to revisit a recurring idea: the “Buffett Screen.” I first concocted this screening tool as I reflected on one of Buffett’s speeches at the 1999 Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) investor meeting. Basically, if Buffett were to start from scratch today, what smaller companies would he pursue that he can’t because it is too small to move the needle for Berkshire?

We covered this topic a month ago, but in light of my recent epiphany, I thought revisiting this list and implementing the lessons learned from FTI and many other companies profiled here would be worthwhile.

Here are the original criteria:

• Trading region of primary security: USA & Canada

• Market capitalization: Between $1 million and $2 billion

• Return on total capital over the past 12 months (TTM):  greater than 15%

• Earnings before interest and taxes margin (TTM): Greater than 10%

• Price to Free cash flow: Less than 15 times

• Price to book value: less than 2.5 times

This time, I want to focus specifically on the tweak I’m making to this screen and see what companies are added to this list as a result.

Let’s dig in.

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I’m about to share the results from a stock screen I created using Koyfin. It is one of the many functions I find myself using daily on the Koyfin platform; It also allows me to create watchlists to track many portfolios, review a decade of financials, or compare companies on various metrics. Unleash the power of Koyfin’s platform and transform your research process by signing up for Koyfin here and receiving 10% off.

Disclaimer: I have an affiliate partnership with Koyfin and receive compensation if you sign up via the link above. It helps me fund this endeavor. I would still recommend using it even if I didn’t have this partnership because it’s an awesome product, but I’d be stupid to turn down a revenue opportunity. You get a discount, Koyfin gets new business, and I get a commission. Win-win-win)