Seek out companies with high returns on equity from "summary" of Buffettology by Mary Buffett,David Clark
When looking for companies to invest in, one key factor to consider is their return on equity. Return on equity is a measure of how efficiently a company is using its shareholders' equity to generate profits. This metric is calculated by dividing a company's net income by its shareholders' equity. Companies with high returns on equity are generally considered to be more profitable and efficient than those with lower returns. This is because a high return on equity indicates that a company is able to generate a strong profit relative to the amount of shareholder equity invested in the business. Warren Buffett himself has stated that he prefers to invest in companies with high returns on equity. This is because he believes that companies with high returns on equity are more likely to be able to sustain their profitability over the long term. By seeking out companies with high returns on equity, investors can potentially identify businesses that are well-managed, profitable, and have a competitive advantage in their industry. These companies are more likely to be able to generate strong returns for their shareholders over time.- When evaluating potential investment opportunities, it is important to consider a company's return on equity. Companies with high returns on equity are generally more profitable and efficient, making them attractive options for long-term investors.
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