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Buffettology: Sustainable Growth Screen

Performance

  Buffettology: Sustainable Growth S&P 500
YTD Return: 0.6% 1.3%
Five Year Return: 25.9% 18.6%
Ten Year Return: 11% 5.2%
Inception: 11.8% 4.1%
Data as of 3/31/2014
The Buffettology: Sustainable Growth Screen represents AAII's interpretation of the investment approach and is not determined by the original strategist. The list of passing companies represents a hypothetical portfolio, which is used to track the screen’s performance on a chart.

Passing Companies

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Screening Criteria

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Chart

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Like most successful stockpickers, Warren Buffett thinks that the efficient market theory is absolute rubbish. Buffett has backed up his beliefs with a successful track record through Berkshire Hathaway, his publicly traded holding company.

Buffett is often identified with Benjamin Graham, with whom he studied, worked under, and maintained a long friendship. However, his own investment experience has led him to adopt the approaches of other investment pioneers, as well, in particular Philip Fisher's focus on the importance of a business's growth prospects and management. [For more on Benjamin Graham, see AAII's Graham--Defensive Investor (Non-Utility), Graham--Defensive Investor (Utility) and Graham--Enterprising Investor screens. For more on Philip Fisher, see AAII's Fisher (Philip) screen.]

Buffett has never expounded extensively on his investment approach, although it can be gleaned from his writings and explanations of holdings in the Berkshire Hathaway annual reports. Outsiders, however, have attempted to put together explanations of his investment style. One recently published book that discusses his approach in an interesting and methodical fashion is "Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett the World's Most Famous Investor," by Mary Buffett, a former daughter-in-law of Buffett's, and David Clark, a family friend and portfolio manager [the book is published by Simon & Schuster, 800-223-2336; $27.00]. This book was used as the basis for screen.

Table 1 below provides a summary of Buffett's investment style.

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