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On my way home on the bus from work today I was reading the Technical Analysis book that I  had picked up at the library earlier this week. About 3/4 of the way home this guy sitting near me asks what I am reading. I tell him that I am reading the book “How Technical Analysis Works” by Bruce M. Kamich. He tells me that he is really into charting and whatnot and from what he said it sounded like he was some sort of researcher for an investment firm.

We get to talking, and he goes on to tell me that he is doing some research on Berkshire Hathaway’s holdings. For those of you who are unfamiliar with the company, it is an investment company that is run by Warren Buffet who is one of the richest people in the world. What he was looking for was a common theme between all of the stocks that the company had invested in.

Here is what he found:

• Companies had a P/E ratio that was either in the low 20s or in the teens.
• Companies tended to be established and well known firms (with a few exceptions)
• The companies had a dividend rate between 1% and 5%.

As a summarization of his findings, Buffet seems to like well established companies that are underpriced and pay a decent dividend. So there you have it…if you want to trade like Buffet, follow these three easy criteria. Ah yes, if it were only that easy. It does give us a bit of insight on the thought process of one of the world’s greatest investors.

Personal Finance, Stocks berkshire hathaway, investment, stock, warren buffet