a) a business he understands;
b) favorable long-term prospects;
c) able and trustworthy management; and
d) a sensible price tag.
Buffett looks for companies that have competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms.
Buffett always looks at ROE to see whether or not a company has consistently performed well in comparison to other companies in the same industry.
Buffett prefers to see a small amount of debt so that earnings growth is being generated from shareholder's equity as opposed to borrowed money.
The profitability of a company depends not only on having a good profit margin but also on consistently increasing this profit margin.
