Warren Buffett amassed a massive fortune from stock investing. He earned his reputation as the “GOAT” of investing not because of luck, but through a sound investment philosophy. If you’re a first-time investor, it would help to review Buffett’s non-negotiable checklist before you begin your wealth creation journey.
The GOAT adheres to a set of self-imposed rules to improve chances of success and avoid costly mistakes. While he incurred losses too, his winning stocks have far outnumbered his losers. Credit this track record to his consistent application of a value investing strategy.
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Understand the business
Buffett suggests investing only in businesses you can understand. If you can’t explain the business model or how the company makes money, skip it and move on. In short: don’t take a shot in the dark with your capital.
Look for a durable business
Buffett looks for companies with strong and sustainable competitive advantages. Among his favourites were Restaurant Brands International (TSX:QSR), the parent company of Burger King, Tim Hortons, and Popeyes. However, the 2020 pandemic forced him to sell his positions in non-U.S. stocks and repurchase shares of his conglomerate, Berkshire Hathaway.
Nevertheless, he bought QSR shares in 2014 for its franchise model, brand power, and capital-light business. Today, RBI is one of the world’s largest quick-service restaurant companies. The $32.3 billion fast food company now owns four iconic, independent brands, including Firehouse Subs.
QSR has displayed resilience during the COVID-19 outbreak and has since weathered economic downturns. The global growth also indicates a durable business. About 70% of total earnings come from its international business.
Furthermore, the parent company of Tim Hortons, Burger King, and Popeyes has not declared a net loss in any fiscal year since the 2020 global pandemic. One reason for the consistent profitability through those years is the asset-light franchise model with strong brands.
QSR trades at $94.90 per share, pays a 3.6% dividend, and has never missed a quarterly dividend payment since Q1 2015.
Find a business with an economic MOAT
Suncor Energy (TSX:SU) was Buffett’s favourite Canadian oil stock until he went full-American stock holdings 2021. The GOAT, through Berkshire Hathaway, took a position in 2013 during the oil boom and exited in 2016 due to the oil crash.
Since Buffett is a value investor, he bought Suncor shares in 2018 when the stock price crashed. He sold the entire second holding in Q1 2021 to focus on U.S. equities. Today, Suncor is TSX’s oil bellwether. The $83 billion fully integrated energy company boasts a resilient balance sheet and diverse revenue sources.
In addition to upstream oil sands operations, Suncor has four major refineries and owns Petro-Canada. The downstream refining segment provides a hedge against low oil prices. Rich Kruger, President and CEO of Suncor Energy, said the business model and uniquely integrated asset base offers investors a premium value proposition. If you invest today, the share price is $69.44, with a dividend yield of 3.5%.
Core philosophy
Warren Buffett has other items on his investment checklist besides the three major ones above. Investors should likewise follow his core philosophy of preserving capital and avoiding losses.
