buffett-quality-value_skill

Overview

This skill encodes Warren Buffett’s quality value investing approach, emphasizing buying high-quality businesses at reasonable prices and holding them for the long term. It implements metrics for moats, ROIC/ROE thresholds, management assessment, and a simplified DCF valuation to produce actionable recommendations.

How this skill works

The skill analyzes financial statements and market data to compute ROIC/ROE, score economic moats, and evaluate management capital allocation and transparency. It runs a composite Buffett score combining quality metrics, moat strength, management quality, and valuation to classify buy/hold/reject outcomes and suggested position sizing and holding horizon.

When to use it

• Screening for long-term core equity holdings using quality-first criteria
• Evaluating whether a stock has a sustainable competitive advantage before buying
• Deciding position size and holding period for high-quality companies
• Comparing companies when price is reasonable but not deeply discounted
• Integrating into a rules-based portfolio using ROIC and moat thresholds

Best practices

• Prioritize quality: identify durable moats before focusing on price
• Require ROIC >= 10% and prefer ROIC >= 15% for best candidates
• Assess management by track record of shareholder-friendly capital allocation
• Use a conservative growth rate and WACC in DCF to avoid overpaying
• Hold winners long term; avoid frequent trading based on short-term noise

Example use cases

• Automated screening pipeline: filter universe by ROIC, moat score, and management score
• Pre-trade checklist: confirm moat type, ROIC vs WACC, and DCF intrinsic value
• Portfolio construction: allocate larger weight to companies with VeryWide moats
• Research report generation: produce structured Buffalo-style recommendation JSON
• Risk review: flag firms where ROIC falls below WACC or moat deteriorates