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Posted October 3, 2025 at 10:30 am
Warren Buffett’s approach to investing centers on a lesson refined across many years: purchasing excellent companies at reasonable prices beats buying average ones at steep discounts. He seeks businesses with lasting competitive strengths—what he calls “economic moats”—capable of producing strong returns over extended periods. Rather than following market trends or chasing speculation, Buffett targets firms led by skilled management teams that reliably produce earnings and cash, bought at rational prices.
The Validea Warren Buffett model transforms these timeless ideas into a structured method for finding exceptional companies. Based on insights from Mary Buffett’s Buffettology, this quantitative approach converts Buffett’s principles into specific financial criteria meant to identify businesses with enduring competitive power and dependable performance.
The foundation of the model requires consistent earnings: a minimum of ten consecutive years showing profits, with no annual losses permitted. This mirrors Buffett’s attraction to companies that stay profitable regardless of economic conditions.
Performance benchmarks are equally demanding. Businesses must achieve an average return on equity of at least 15% across ten years, never falling below 10% in any single year. For non-financial companies, average returns on total capital must exceed 12%, confirming that management deploys resources wisely.
Balance sheet stability provides another essential screen. Companies must produce positive free cash flow, and their long-term debt cannot surpass five times yearly earnings, protecting financial soundness. Management capability is assessed through how well they deploy retained earnings—demanding at least 12% returns on these funds to demonstrate thoughtful capital decisions.
Only once these demanding quality standards are satisfied does price consideration enter the equation. Consistent with Buffett’s thinking, the model stresses discipline—seeking chances to acquire outstanding businesses at sensible prices instead of chasing speculative plays or riding market momentum.
Visit Validea.com to access in-depth stock analysis and tools designed to emulate Buffett’s proven investment principles.
Here are the stocks according to Validea’s Buffett model for October of 2025.
| Ticker | Company Name | Patient Investor | Price | Market Cap ($mil) | PE Ratio | Price/ Sales | Relative Strength | Price/ Book | Quality Percentile | Return on Equity | Return on Capital |
|---|---|---|---|---|---|---|---|---|---|---|---|
| ADP | AUTOMATIC DATA PROCESSING INC | 100 | $293.50 | $118,894 | 29.4 | 5.8 | 61 | 19.2 | 1 | 76.0% | 66.6% |
| AMAT | APPLIED MATERIALS INC | 100 | $204.74 | $163,105 | 24.4 | 5.7 | 57 | 8.4 | 5 | 35.6% | 39.3% |
| GWW | WW GRAINGER INC | 100 | $952.96 | $45,582 | 24.0 | 2.6 | 44 | 12.4 | 4 | 55.3% | 42.3% |
| NTES | NETEASE INC (ADR) | 100 | $151.99 | $96,240 | 20.3 | 6.3 | 85 | 4.6 | 2 | 24.4% | 21.8% |
| NVO | NOVO NORDISK A/S (ADR) | 100 | $55.49 | $183,565 | 14.2 | 3.7 | 17 | 9.3 | 1 | 79.2% | 89.2% |
| NEU | NEWMARKET CORP | 100 | $828.21 | $7,782 | 16.4 | 2.8 | 83 | 4.8 | 7 | 33.6% | 29.5% |
| PAYC | PAYCOM SOFTWARE INC | 100 | $208.14 | $11,709 | 28.2 | 6.0 | 73 | 6.5 | 1 | 25.8% | 26.4% |
| SFM | SPROUTS FARMERS MARKET INC | 100 | $108.80 | $10,633 | 22.4 | 1.3 | 50 | 7.8 | 10 | 36.9% | 26.1% |
| TSCO | TRACTOR SUPPLY CO | 100 | $56.87 | $30,138 | 28.0 | 2.0 | 49 | 12.1 | 8 | 45.3% | 20.0% |
| ITW | ILLINOIS TOOL WORKS INC | 96 | $260.76 | $76,012 | 22.9 | 4.8 | 51 | 23.7 | 2 | 109.1% | 60.9% |
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Originally Posted October 3, 2025 – Warren Buffett Stocks
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Validea Capital Management and is being posted with its permission. The views expressed in this material are solely those of the author and/or Validea Capital Management and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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