A Buffett Approach to Identifying Value Plays: The Case of Martin Marietta

Abstract

This paper presents a systematic methodology for identifying potential value plays. The foundation of the process is a collection of metrics similar to those used by Warren Buffett and focuses on his definition of “durability of competitive advantage”. After a potential value play is identified, and a current economic analysis is applied to the candidate, 6 variables from the Income Statement and 9 from the Balance Sheet form the parameter base whereby the strength of the company is measured. This 15-point checklist and ensuing analysis and valuation are applied to Martin Marietta, but can also be a useful process for identifying other worthy value play candidates. The steps can also be applied as a format or template in an Investments course for an equity analysis assignment.