In Search of Ideas...

Revisiting a list of ideas for us all to discuss (and potentially invest)

Lycurgus Consulting the Pythia, Eugene Delacroix, 1835/1845, oil on canvas (University of Michigan Museum of Art)

Numerous financial writers and investors have Andy Williams’ “It’s the Most Wonderful Time of the Year” playing in their heads as they react to the annual Berkshire Hathaway letter. I’d be lying if I said that I didn’t read it, enjoy it, and will likely write about it; but I am still reflecting on the letter and don’t have coherent enough thoughts to put on paper (screen?).

In the meantime, I want to revisit an idea I got from Buffett’s 1999 shareholder meeting. Investors tend to follow Warren Buffett’s investing style literally by buying what is in the Berkshire portfolio rather than heed his advice on where individuals with much smaller sums of money should focus their attention.

So, I built a market screen in Koyfin that I thought would be a decent jumping-off point for this investing concept. I’ve published the results a couple of times before, but I think it is worth revisiting occasionally.

Here are the 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

The list of companies meeting this criteria declined by only one, but there was a lot of turnover in a little less than five months. 21 Companies that were on this list in October didn’t make it — 14 because returns on capital declined, 1 missed EBIT margins, 6 above valuation criteria — while there were 20 new additions.

Let’s look at all the companies that fit this investing criteria screen and dive a little deeper into one industry that is popping up more frequently.

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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)