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Warren Buffet: The valuable art of picking stocks

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By Arun Dahal Khatri

Warren Buffet is one of the greatest names for value investing. His noble art of picking stock is very famous in the world. Because of such valuable art, he has been listed among the top 10 wealthiest persons in the world. He is currently the chairman and the CEO of the world's greatest company Berkshire Hathaway. His art of buying stock creates high benefits for his company. He often maintained the time to buy the stocks when nobody else wanted them. His genius strategy to select the stock helped him to become the greatest investor in the world. In today's time, Breakshire Hathway has a portfolio of $312 Billion. Breakshire Hathway owns a total of 48 company shares in its portfolio. He is a very smooth player in the field of arbitrage and a genius at finding undervalued stocks. With the mentorship and leadership of Warren Buffett, the 10 years performance level of Breakshire Hathway is 120.85%.

What's the quality of stocks warren looks while buying :

1- Earning History and consistency in nature: Before buying the stock Warren oughts to know the earning history of the stocks and the consistency in earning. He wants to invest for the long term that's why most of the time before picking any stock he wants to elucidate that the stock is executed well in a continuous manner. While buying the companies he usually uses the chart to clarify the doubt about the earnings. Making a portfolio is the greatest art and adding the stocks to the portfolio is like adding a family member to the house that's why he never takes unusual risks like talking the stocks without analysis. Therefore, at the time of analysis, he habitually sees the earning history and gives high priority to understanding the earnings of the company.

Earning per share of Coca-cola:
Year's                    EPS
2021                     $2.25
2020                    $1.79
2019                     $2.07
2018                     $1.50
2017                     $0.29
2016                     $1.49
2015                     $1.67
2014.                    $1.60
2013                    $1.90
2012.                   $1.97
2011                     $1.85
2010                    $2.53
If anyone desires to buy the company from the stock exchange the first thing to keep in mind is the purpose of buying. The ultimate goal of owning shares is taking the returns from the investment rather than for other purposes. Therefore, before buying the shares he must make a view of the overall earning history of the company rather than the price of the stocks. Warren Buffett suggests buying a company having a strong earning history along with consistent earning nature. He warned to buy the companies having a speculative quality. He gives high priority to such companies whose earning history along with their fundamental base is strong.

2-Companies having strong fundamentals and underrated:  During the time of selection of stocks, Warren uses his 200% of brain to choose the best company having strong fundamentals. Warren suggests we need to buy the company having strong fundamentals and is underrated. Finding the underrated company is also one of the greatest skills Warren has. Most of the stocks in his portfolio are added while they are underrated. He points out the overall quality of the stocks and adds them to the portfolio. He is very active in the field of arbitrage as well which is the most important skill for investment.

How to find underrated stocks :
1- Stocks giving high dividend yields continuously
2- EPS is growing yearly in a consistent the manner
3-Sudden failing in price of stocks
4-Price to book ratio is less than 1

While buying Coca-Cola on Jan 1, 1988, he used his genius brain and bought Coca-cola shares worth $ 1 billion at the price of $2.40 per share. Right now the valuation of the overall coca-cola in his portfolio is $24.7 Billion with 400million shares. Before buying the Coca-cola shares he used his knowledge to study the financial position of the coca-cola including its nature.

Dividend per share of Coco-cola from 1980-1987 before Warren brought the Coco-cola shares

Year's        Dividend per share "$"

1987          0.0175
1986          0.01625
1985          0.01542
1984          0.01438
1983          0.01396
1982          0.01292
1981           0.01208
1980          0.011

 Fundamental Analysis of Coco-Coal  before buying by Breakshire Hathway

Year Revenue($Billion) Net Income($M) Net margin EPS($) ROA ROE EBIT($Million)
2079 3.895 420 10.8% 1.13 16.3% 23.0% 644
2080 4.640 422 9.1% 1.14 14.4% 21.1% 680
2081 4.836 482 10.0% 1.30 14.8% 22.2% 720
2082 4.760 512 10.8% 1.31 13.5% 20.3% 773
2083 5.056 559 11.1% 1.37 12.8% 19.65 828


Revenue: Total money generated from the operation of the business.

EBIT: earning Before Intrest and Taxation

ROA: Return on assets

ROE: Return on equity

After analyzing all this data Warren Buffet finalized his decision and invested in CoCo- Coal. Until now he is holding Coca-Cola. Out of 100% of Berkshire Hathaway shares, 7.9% of shares of Breakshire Hathway are Coco-Cola. Warren Buffet is intelligent in the field of comparing the stocks before 1988 he used his mind to design the overall figure of Coca-Cola and analyze all the data. He knew that the company fundamentals are exceptionally underrated that's why he made the strong investment decision and brought Coco-coal stocks.

3-Companies Having the trust of Customers: While buying the shares of the companies Warren makes a strong review about the trust level of companies. Most of the companies in his portfolio are trusted by people from the very early age of establishment. Companies like Apple, Coca-Cola, HP, Visa, and Amazon have strong customer loyalty. He believes that the level of earnings of any company depends upon customer loyalty.   He often buys the companies not only by taking the internal financial analysis but also made the macro analysis of the company.

These are the companies that are trusted by people and brought by Breakshire Hathway 

Apple Inc
American Express
Bank of America
Coco Cola
HP inc

These are the companies that are playing an active role in the portfolio of Breakshire Hathway and these are the most trusted companies in the world by the people.

Interesting Fact about Breakshire Hathway:

#Breakshire Hathway never gives dividends to its investor instead of giving dividends company chose to reinvest earnings to buy stocks( New Investment ) and acquisitions.

Breakshire Hathway stock is one of the highest pricing stocks in the world.


1-Value Investment: The strategy of choosing the stocks by analyzing the overall financial position of a company with the view to hold for the long term.

2-Earning Per Share (EPS): The total earnings of the company divided by the total number of outstanding shares.

3- Arbitrage: The strategy used by the investors by buying and selling the stocks or assets to take the advantage of the price difference of the same quality stocks or assets.