A Stock Picking Strategy Derived From Warren Buffett

In this article I cover the stock-picking strategy of Warren Buffett and give you a list of stocks that currently pass our screen based on Robert Hagstrom’s extensive writings about Buffett’s approach. Possibly no other investor today is associated as strongly with the basic principles of fundamental investing as Buffett.

AAII has adapted Hagstrom’s research into a screen that returns 30 companies based on several fundamental and financial strength metrics. The screen finds companies with a history of strong returns to shareholders, positive gross operating income and positive free cash flow. Since 1998, AAII’s Buffett Hagstrom screen has an annualized return of 13.0%, which is 7.3 percentage points higher than the S&P 500 index’s return of 5.7% over the same period. The screen is up 10.2% year to date compared to 8.7% for the S&P 500.