The “Oracle of Omaha” is regarded as one of the best investors of all time. Sitting at over a $100 billion net worth, he has demonstrated over decades his prowess in choosing winners; so much so, that he consistently is near the top of the Forbes richest people in the world.

Warren Buffet follows the Benjamin Graham style of value investing. This implies seeking out securities with prices that are unjustifiably low based on their intrinsic worth. This style of investing has allowed him to achieve roughly 20% annual returns since the 1960s, locking Berkshire Hathaway into the top 10 largest companies in the U.S. by market cap.

As a value investor, Warren Buffett always seeks out companies that have demonstrated consistent profitability throughout the years, all while avoiding distractions of “the next big thing” flavor of the week.

He began his career in investing by seeking out extremely undervalued stocks that he felt at least had one last bit of juice left to squeeze. This often meant buying into companies that were so beaten down that most investors steered clear. This is where he found the best deals. He did this in the 1950s where he claims to have earned 50% per year, and also from 1956-1969 when he achieved an average of 29% annually while the Dow returned 7% per year. This is an astonishing feat to do year after year.

As his portfolio grew, he eventually had to move on from the “cigar butt” stocks that Benjamin Graham taught him to invest in, and took advice from his current partner, Charlie Munger. With Munger, he began to shift his investing strategy from buying fair companies at great prices to buying great companies at fair prices. This meant that rather than buying a company that had been recently beaten up and selling after it reverts to the mean, he could adopt a buy-and-hold mindset with his investment horizon set practically indefinitely.

To achieve this, he has relied on several elements in companies’ financial statements. These incorporate criteria from the Income Statement, Balance Sheet, and Cash Flow Statement. The following factors make up the Warren Buffett screener. Only the ten companies that perform best in these categories while also meeting the bare minimums will appear here on Stock Mixology.

Return on Equity > 15%
Net Profit Margin > 20%
Gross Margin > 40%
Operating Margin > 10%
Earnings Yield > 3%
Current Ratio > 1.5
Positive Earnings Growth over Past 5 Years

There are several criteria here, but all encompass what a value investor would look for and are factors Warren Buffett considers compelling to determining if a security can be a lucrative investment. Following these Buffett-like criteria, we then implement a cutoff that companies filtering through the screener cannot have a short interest of greater than 7%, to avoid any distressed companies.

This screener uses the Russell 3000 stock universe. This removes some misleading data in the backtest that could be included, such as a company that goes from $0.01 to $0.02, which could incorrectly appear as a 100% gain. The unfortunate reality with penny stocks is that entering positions in these illiquid stocks is often too challenging. Therefore, we determine it unrealistic for this service and although it would be nice to advertise higher potential gains, we opt to be straightforward and only include Russell 3000 companies that are big enough to invest easily in.

To put it bluntly, this screener has worked. It is very viable for small retail investors due to the ability to enter positions in small-cap companies.

The screener not only surpassed the S&P 500 growth rate but also assumed less downside risk in the portfolio, as shown by its Sharpe and Sortino ratios. The metrics below derive from rigorous backtesting and account for survivorship bias, look-ahead bias, market liquidity, and data mining.

The data originates from an industry-leading data set. The table and graph are current as of January 2025.