A “Warren Buffett Way” cheatsheet

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):

Name <stock name here>
Symbol <stock symbol here> 
Date <date of your analysis>
Check Questions pgs. Description, formula, or checklist Notes
  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.

In a related note, if you are interested in quotes related to Warren Buffett, I just created this page of Warren Buffett quotes.