No. of Recommendations: 10
Jim's screen included a criterion of EPS growth over last 5 years > 7%.
One can argue that earnings are unlikely to grow over the next 5 years if they haven't grown over the past 5 years, but that wasn't the Buffet prescription. If he wanted to look at growth over the past 5 years, he would have said so
Jim did include past EPS growth as a criterion, but he also used Value Line's prediction of eps growth in the next 3-5 years:
* EPS growth last 5 years > 7%
* Forecast EPS growth next 3-5 years > 7%
Buffett is famously not interested in investing in turnarounds, so I suspect that he would agree that if you haven't had solid eps growth over the last 5 years, you're not a very good candidate for having reliable future eps growth, either. The greater problem is that Value Line is almost certainly not as good as Buffett at predicting that future growth. But it's better than nothing, unless we want to do the Buffett/Combs exercise ourselves.
Which we could do.
Here's one that I think fits pretty well, maybe others could add to the list: IBKR, current share price $80. Trailing P/E 14.66, forward P/E 13.18, historical earnings per share in the last 7 years are $5.50, $3.75, $3.24, $2.42, $2.10, $2.28, $1.07, $1.25 and $0.78 (easily besting the 7% criterion or Jim's more stringent 11% criterion), annual client equity growth of 20% over the last 5 years (and at similar levels for much longer period than that), improving margins (they are heavily automated, so new clients do not require commensurate new spending), conservatively managed, strong balance sheet, strong moat (being heavily automated, they are a low-cost provider; their overall cost to investors is unbeatable, if you include interest rates paid on balances, low commissions, low cost forex, etc.) It's a bit on the small side for Buffett (market cap $34b, of which 3/4 is owned by management, mostly by the founder, Thomas Peterffy.)
I just bought a few more shares, it's my #3 position after Fairfax. (Fairfax could be on the list too.) But it would be lovely to see other ideas of stocks people are familiar with that fulfill the Buffett/Combs watercooler criteria.
dtb
