Buffett and Beyond Abstract

This first article will begin a series of three articles written by Dr. J.B. Farwell, on the investing methodology and criteria of legendary investor, Warren Buffett. This series of articles is entitled Buffett and Beyond. These articles discuss not only the qualitative and quantitative criteria Buffett uses in his stock selection, but also the Doctoral dissertation work of Dr. J.B. Farwell which takes Buffett’s work one step beyond.

The first article covers the qualitative (subjective quality of management, etc.) methods Buffett uses to distinguish the business philosophy and management style Buffett feels a company must develop in order to sustain the growth of that company.

The second article covers the quantitative (statistical numbers, ratios, etc.) financial aspects Buffett requires so that he may project a company’s asset base 10 years into the future in order to translate that asset base into future earnings. From there he sets his future 10-year target price. That future target price is then discounted back using his required rate of return to determine Buffett’s all-important purchase price.

The third article incorporates Dr. Farwell's research work based on the type of accounting Buffett uses for his analysis. This research is based on a little known method named Clean Surplus Accounting, which is used to calculate the asset base of a company in a manner different than does present day accounting book value.