4 Ways to Choose Good Stocks like Warren Buffett did

Warren Buffett is known as a seasoned investor who is good at choosing good stocks to buy. This skill also makes him the number 5 richest person in the world in 2022 according to Forbes.

However, you know, unlike other investors, Warren Buffett has never done technical analysis in choosing stocks.

The analysis he uses is fundamental analysis by reading the history of the company's financial statements as a whole.

Then, what are the indicators that Warren Buffett pays attention to and influence his decision when buying stocks?

Check out 4 ways to choose Warren Buffett-style stocks that made him rich,

1. Pay attention to the debt to equity ratio.

According to Warren Buffett, good stocks are stocks from issuers with a small debt-to-equity ratio. A small Debt to Equity Ratio (DER) value indicates that management uses more equity than debt to finance the company's operations.

2. Pay attention to Return on Equity (ROE).

ROE is the return that the company prints to shareholders. The higher the ROE, the better the company is at generating net income for shareholders, thus making shares more attractive to buy.

3. Look at the net profit margin.

Net profit margin or net profit margin (NPM) is also an indicator that Warren Buffett often uses in choosing good stocks. The higher the NPM, the more efficient the company is in managing costs.

4. Look for discount stocks.

Warren Buffett also often looks for stocks that are discounted or priced below their fair value. The way to find out discount stocks is to calculate the intrinsic value of the stock and then compare it with the current stock price: are they being sold at a higher price or are they selling for less.