How Warren Buffett picks stocks

Quality at a fair price

Who he is

Warren Buffett led Berkshire Hathaway for six decades and is the most closely followed investor in the world. He started out hunting for cheap stocks and, over time, moved to owning great businesses for the long run. His yearly letters to shareholders are among the most widely read texts in investing.

The idea in plain words

Own wonderful businesses at a fair price. A wonderful business earns a high return on its own capital year after year without leaning on debt; a fair price is one where the profits you get for each real are high. Our screen turns that into numbers: steady ROE, low debt, the cheapest P/E.

This week’s example · first week of November 2026

CYRE3Cyrela

Homebuilder

Cyrela has averaged 15.3 cents of profit a year on every real of shareholder money, and the whole company costs only 3.65 times one year's profit. Among the 13 quality names on Buffett's screen, none was cheaper.

5-yr avg ROE15.3%R$ 15.30 of profit a year per R$ 100 of shareholders' money

P/E3.7The price equals about 3.7 years of current profit

P/B0.67Below what the books say the company is worth

Net debt / EBITDA2.0xModerate debt for the cash it generates

Read the full note →

Our formula, step by step

5-year average ROE of at least 15%, with every single year at 10% or more.
Profitable in every one of the five years.
Net debt no more than 3× annual profit (non-financial companies).
The pick is the highest earnings yield, that is, the cheapest P/E.

Rules for all four legends

One company per legend per week, in the order Barsi → Bazin → Buffett → Lynch.
A company picked in the last 4 weeks is skipped.
Stocks with a P/E under 3 are excluded.
Dividends are the dividends and JCP the company actually paid each year (CVM filings), before tax, per share at today's share count.

Every Buffett pick so far