The 10 most important indicators that Buffett values when selecting stocks To be frank, they have a set of ironclad screening criteria that have not changed for decades. I will review these 10 indicators for you today, and after reading them, you will know why some companies he doesn't even look at, while others he takes for a lifetime. 1. Profit making efficiency: ROE consistently above 20% ROE stands for Return on Equity, which simply means the amount of money you invest and how much the company can help you earn back each year. Buffett demands a long-term profit of over 20%, which means the company can earn twice as much as its peers with the same capital. 2. Product profit: gross profit margin>60% A high gross profit margin indicates strong pricing power and strict cost control of the product. Below 40%, Buffett hardly touches businesses that rely on volume, which die out in fierce competition. 3. Actual received profit: Net profit margin>20% Don't just make noise, look at the money that ends up in your pocket. For companies with a net profit margin below 10%, Buffett believes that you are working for suppliers and employees, not for shareholders. 4. Is the price expensive or not: P/E ratio<14 times A price to earnings ratio of 14 means that the capital can be recovered within 14 years. Buffett is not avoiding growth stocks, but he demands a safety margin. No matter how good the expensive thing is, buying it too expensive is still a loss. 5. Generous dividend payout: Annual dividend payout>5% Real money giving back to shareholders is not a pie in the pan. Buffett particularly likes companies that pay dividends every year and can increase their profits, which shows that the management is responsible to shareholders. 6. Industry status: Must be a 'leading elder brother' The second and third in the industry, Buffett doesn't even look at it. What he wants is the one with the deepest moat, the largest market share, and the strongest pricing power. The less competition there is in an industry, the more he likes it. 7. Brand awareness: a "hard brand" known to the whole nation A brand is like a moat. Coca Cola, Apple, Gillette, you don't need to explain what they do. This' mental monopoly 'cannot be broken by competitors no matter how much money they spend. 8. Healthy cash flow: able to "generate blood" on its own without relying on borrowing money Profits can be falsified, but cash flow does not lie. Buffett values operating cash flow the most. The company can generate its own blood and not rely on borrowing money to sustain itself, which is truly healthy. 9. Being able to 'arbitrarily raise prices': a' hard currency 'that is not afraid of inflation Inflation is coming, costs are rising, can you pass on the price to consumers? The money printing machine is the one that can raise prices at will; Those who cannot increase their prices are laborers. 10. Low debt: Don't take on a lot of debt Companies with high debt will die when the economy fluctuates. Buffett likes companies with light assets, low debt, and ample cash, and only by living long can they earn long.