Buffett emphasizes return on equity (ROE), the most common measure of a company's profitability. Buffet likes companies whose ROEs he can forecast at least 10 years out. He is particularly fond of firms that don't require a lot of capital to produce a high ROE, which is what drew him to Washington Post WPO. The Post's ROE rarely fell below 15% (twice that of the average publisher) in the 1990s. The Post's superior ROEs stem largely from the fact that newspapers are cheap to produce but can command a lot for ads.
Consistently Strong Free Cash Flows >>