Analysis On The Reliabilty Of Valuation Modelling

Warren Buffett is on of the best-performed investors.Under Buffett's management,Berkshire Hathaway Inc.achieved an significantly higher investment return than the US stock market.There are already numerous studies about Buffet's investment strategy,most of which are qualitative.Besides,Buffett's investment strategy is changing and improving over time.In this paper,we focus on the 45 investments made during 2009 and 2016,and try to analyze those cases in a quantitative method.We calculated the P/B,P/E,PEG and ROTCE ratios,and compare those ratios with those of the whole US stock market.Base on the comparison above,we find that Buffet had a preference to those with low P/E ratios(P/E below 15)or high ROTCE ratios(ROTCE over 10%).Furthermore,we apply those strategies to the A-share market.We find that those stocks with P/E ratios in the second quartile significantly outperformed the whole market,while those with P/E ratios in the first quartile didn't.And we could either achieved a significantly better performance base on the ROTCE ratio.