A “Warren Buffett Way” cheatsheet

By Alvin Alexander. Last updated: July 21, 2018

This is a bit of a “one off” post for this website, but I’ve been investing a lot lately, and I created the following “Warren Buffett Way” cheatsheet to help me when deciding to invest in a company, or not.

As that title implies, this cheatsheet is based on the wonderful book, The Warren Buffett Way, by Robert S. Hagstrom, Jr.

Without any further ado, here is my “Warren Buffet Way” cheatsheet (reference page):

Check	Questions	pgs.	Description, formula, or checklist	Notes
Name	<stock name here>
Symbol	<stock symbol here>
Date	<date of your analysis>
	Business Tenets
	Is the business simple and understandable?	77, 105	Invest within your circle of competence
	Does the business have a consistent operating history?	78, 105	The best returns are produced by companies that have been providing the same product or service for years. Severe change and exceptional returns don't mix.
	Does the business have favorable long-term prospects?	79, 105	Franchies (good) vs. commodities (bad). "Franchise": Has a product that is (1) needed or desired, (2) has no close substitute, and (3) is not regulated.
	Management Tenets
	Is management rational?	80, 109
	Is management candid with shareholders?	83
	Does management resist the institutional imperative?	84
	Financial Tenets
	Focus on ROE, not earnings/share	87, 107
	Calculate "owner earnings" to get a true reflection of the value	89, 106	[Net Income] + [Depreciation] + [Depletion] + [Amortization] - [Capital Expenditures] - [Working Capital That Might Be Needed]
	Look for companies with high profit margins.	91, 108
	For every dollar retained, make sure the company has created at least one dollar of market value (the "One dollar premise").	92, 112
	Market Tenets
	What is the value of the business?	93
	Can the business be purchased at a significant discount to its value?	96, 107		Book value, market cap

	Quotes from “The Warren Buffet Way”
	One does not have to be correct very many times ... 12 investment decisions have made all the difference.
	The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.
	He is willing to take risks where the odds of total loss are low and upside rewards are substantial.
	If he is unable to project with confidence what the future cash flows of a business will be, he will not attempt to value the company.
	There is no fundamental difference between buying a business outright and buying shares in a business.