Gustavo Ballvé on May 4th, 2011
Food for thought, Home, Risk management, Signal or Noise

A Bloomberg news story on Buffett’s “interest” in Brazil has the local markets reacting today. Explaining: Bloomberg compiled a list of 27 companies in Brazil and China that “fulfill Buffett’s criteria” as explained in his Owner’s Manual (PDF). While Buffett’s criteria are qualitative and, as written, more subjective, Bloomberg had to put numbers to Buffett’s qualitative descriptions, so it’s an interesting exercise but little more than guesswork (details below). Good companies with great business models such as Odontoprev and Marcopolo made the Bloomberg list and the market reacted as if Buffett himself was issuing buy orders… Again, we could easily see Buffett warming up to Odontoprev or Marcopolo, but it still wasn’t this time around.

Bloomberg’s criteria:

“There are 27 companies from Brazil and China with market values from $1 billion to $15 billion that have capital expenses accounting for at least 5 percent of their net fixed assets; a return on equity exceeding 10 percent; profit growth in the past five years that ranked in the top 50 percent; and an average price-earnings ratio in that span that was less than the average company in the MSCI Emerging Markets Index, according to data compiled by Bloomberg.”

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