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Top 10 stocks to look at based on Warren Buffett's investment methodology

The stocks having market capitalization greater than Rs 500 crore and Average Rupee Volume greater than 10,000 crores are considered to filter stocks for the list.

September 01, 2020 / 02:15 PM IST
 
 
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The legendary investor, Warren Buffett celebrated his 90th birthday on August 30. Looking at his life in the rearview mirror, he has been the biggest inspiration for most of the value investors.

The chairman of Berkshire Hathaway Inc. Warren Buffett is one of the most successful investors with a net worth of $82 billion, as on August 30, 2020, according to Forbes.

He is one of the few billionaires who has promised to donate 99% of his wealth, according to media reports.

His learnings are endless and his letters to shareholders have been a guide to value investing.

Warren Buffett’s criteria before you pick any stock which would make them investment-worthy is – a) They must earn a good return on capital, b) they must be run by able and honest managers, and c) they must be available at a sensible price.

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Warren Buffett, a former student of Benjamin Graham. He emphasizes on stocks that are trading at reasonable prices.

Applying similar criteria to Indian markets if we want to pick stocks how can one make that judgment? Well, to make the job simpler for investors in picking stocks conforming to the values of Buffett, we have taken data from MarketSmith powered by William O'Neil.

The following stocks were filtered with the highest Master Score and RS (Relative Strength) rating. Master Score is a proprietary filter created by MarketSmith that highlights great earnings potential and strong price performance of a stock.

On the other hand, RS rating is a technical tool that is the most popular way to see the market’s top performers. The Relative Strength rating is the result of calculating a stock’s percentage price change over the last 12 months.

A 40 percent weight is assigned to the latest three-month period; the remaining three quarters each receive 20 percent weight. All stocks are arranged in order of greatest price percentage change and assigned a percentile rank from 99 (highest) to 1 (lowest).

The filter is applied to look for companies with long-term past and potential future growth. Of the stocks returned by the screen, Buffett most likely would emphasize on those trading at reasonable prices.

The stocks having a market capitalisation greater than Rs 500 crore and Average Rupee Volume greater than 10,000 crores are considered to filter stocks for the list.

Here are 10 stocks, according to the above-mentioned parameters, that one should look at (they are filtered based on Market Score). The stocks having market capitalization greater than Rs 500 crore and Average Rupee Volume greater than 10,000 crores have been considered to filter stocks for the list:

Marksans Pharma: Master Score 78

Marksans Pharma

Navin Fluorine: Master Score 77

Navin Fluorine

Britannia Industries: Master Score 76

Britannia Industries Warren

JB Chemicals: Master Score 76

JB Chemicals

Poly Medicure: Master Score 76

Poly Medicure

Alkl Amines Chemicals: Master Score 76

Alkyl Amines

Abbott India: Master Score 75

Abbott India Warren

Amruntanjan Healthcare: Master Score 74

Amrutanjan Warren

Vaibhav Global: Master Score 74

Vaibhaav Global

Paushak: Master Score 73

Paushak Warren

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Kshitij Anand is the Editor Markets at Moneycontrol.

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