It’s March! That means it’s time for a monthly dose of Buffett wisdom. Ok, ok, just kidding about the wisdom part, but I do have some fresh new stocks for you to take a look at this month.
First, some changes to the score.
Changes
We have changed “Shares Outstanding” to be more accepting of slight deviations. In the past, if a company had shares outstanding of, say, 100 and five years later had 100 shares outstanding, this would be a “fail.” Now, it’s a pass. We instead check to see if share count has expanded by 1% or more.
The cash flow score has been reduced from requiring a value of 1 to a value of 0.75. This score was not in the original Buffettology book so I felt I was being a bit harsh by making it a significant hurdle. It’s still a hurdle, albeit a much easier one to navigate.
Next month we will be adding some foreign issued stocks to the list (Shopify, Spotify as examples that are not U.S. stocks).
There will also be additional work done around the “consistent net income” score to make it more resilient and a better judge of whether something is resilient.
Case in point, USNA. USNA is on the list this month even though net income looks anything but consistent. Instead of checking a five year time horizon, we’ll check each year to ensure “consistent” is how we’d actually define things.
New Buffett Score Stocks
Despite the changes making things a little more lenient, we didn’t get many stocks finding their way into the list. Here are the two new firms:
USNA USANA Health Sciences makes the list this month. Even though I ragged on it a bit above for less than consistent earnings, it does happen to check all the boxes.
MCFT Mastercraft Boat Holdings has been in the list before. It has made its way back into the list due to the cash flow change mentioned above. MCFT’s last five years of cash flow were $246,873,000 and assets are $299,757,000. The CFOA is 0.82.
Stocks Removed From The List
Removed… a few!
AMAT Applies Materials drops out of the list due to the CFOA point. I dropped the minimum to 0.75, but AMAT now has a value of 0.7 there.
KLAC is in the same boat as AMAT, a 0.72 value causes it to drop from the list.
LOPE drops out of the Buffett Score with inconsistent earnings. The company had previously posted annual net incomes of $221M, but that is now down to $184.6M.
LRCX is much like AMAT and KLAC, not enough cash flow for the assets they have. The value here is 0.74, so it’s a hair off the new and reduced value we are looking for.
RGR Sturm Ruger & Co has been removed for losing a point on the “shares outstanding” constraint. With 17.4M outstanding five years ago and 17.7M outstanding today, it falls outside of the acceptable threshold (even with the 1% margin we gave above).
TROW leaves the list due to a lack of consistent earnings. While we still need to do some work to capture the likes of USNA, T Rowe Price has been slipping of late and the score has done its job.
Wrapping Up
That’s all the changes this month. Thanks for, once again, checking out this little project. Thanks for sharing on Reddit and other socials, and for asking awesome questions along the way. I’ll continue to improve and iterate upon the score with the hopes of making it one of the best / easiest free ways to discover new investment opportunities.
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