No. of Recommendations: 4
Berkshire's style, in short: Don't speculate, don't buy something just because it's growing rapidly, just buy streams of earnings.
Aim for the most future earnings for your dollar, with the highest certainty, and the longest probable time horizon.
Reinvest those earnings the same way.
If it isn't making 7% of the purchase price now, it has to make more than 7% of the purchase price next year. (paraphrased quote from Mr Buffett)
Combs said the test Buffett uses is this:
1. How many names in the S&P are going to be 15x earnings in the next 12 months?
2. How many are going to earn more in five years (90% confidence)?
3. How many will compound at 7% (50% confidence)?
This test was used to find Apple.
