If we translate Warren Buffett’s investment philosophy into an ASX screen, there are some very clear characteristics to look for.
One important qualification: Buffett himself would not necessarily buy any particular ASX stock today, and Berkshire's scale means his opportunity set is different from that of an individual investor. So the useful question is: which ASX businesses resemble the type of business Buffett has historically wanted to own?
Buffett's core criteria
Buffett has repeatedly described the objective as owning businesses that generate cash, earn high returns on capital, have durable competitive advantages, and can be purchased at a sensible price.
I'd translate that into 8 tests:
| Buffett criterion | What I'd look for on ASX |
|---|---|
| 1. Durable moat | Strong brand, network effect, scale, switching costs or structural advantage |
| 2. High returns | ROE ideally >15%; ROIC/ROCE also high |
| 3. Low debt | Net debt/EBITDA preferably <2×; ideally net cash |
| 4. Consistent earnings | Profits generally rising over 10+ years |
| 5. Strong free cash flow | FCF consistently tracks or exceeds reported profit |
| 6. Reinvestment opportunity | Can reinvest retained earnings at high returns |
| 7. Excellent management | Rational capital allocation, sensible acquisitions, shareholder orientation |
| 8. Sensible price | Don't buy a wonderful company at an absurd valuation |
Berkshire's published acquisition criteria are remarkably close to this: consistent earning power, good ROE with little/no debt, capable management, a simple business and an acceptable price.
And Buffett has specifically said he prefers businesses with durable economic advantages and first-class CEOs, describing Berkshire as a "business-picker" rather than simply a stock-picker.
The ASX companies I'd investigate
Using those principles, I'd put the following on a Buffett-style ASX watchlist, rather than saying Buffett would definitely buy them:
Tier 1 — particularly Buffett-like characteristic
| ASX | Company | Why it fits the framework |
|---|---|---|
| COL | Coles | Essential product, scale, recurring demand, strong cash generation |
| WOW | Woolworths | Scale, essential products, customer relationships, defensive demand |
| REA | REA Group | Dominant platform/network effect, exceptional margins, high ROIC |
| CAR | CAR Group | Strong network effects, high margins, asset-light model |
| SOL | Washington H. Soul Pattinson | Long-term capital allocation, diversified quality assets |
| CSL | CSL | Strong competitive advantages, global scale, recurring demand |
| MTS | Metcash | Defensive food distribution infrastructure, although economics are weaker |
| SHL | Sonic Healthcare | Scale, recurring healthcare demand, established infrastructure |
REA and CAR are particularly interesting from a pure "economic moat" perspective. Their businesses have characteristics Buffett has historically liked: once a platform becomes dominant, competitors have difficulty replicating the network and customer ecosystem.
But there's a second Buffett test that is often forgotten
Price matters enormously.
Buffett's philosophy evolved from buying cheap businesses to buying excellent businesses at reasonable prices.
He has explicitly said that Berkshire seeks businesses with good returns on the tangible capital required to operate them, capable and honest management, and a sensible purchase price.
So I would not simply screen for:
ROE > 15% + low debt = Buffett stock
That produces some dangerous false positives.
For example, a company can have a 30% ROE because it has very little equity and lots of leverage.
That's why I'd use:
ROE + ROIC + debt + FCF + earnings growth + valuation
rather than ROE alone.
My Buffett-style ASX screen
If I were building this specifically for you, I'd start with:
Quality
ROE: >15%
ROIC: >10–12%
10-year average ROE: >12–15%
EPS: positive in most/all years
10-year EPS growth: >5%
FCF: positive in most/all years
Balance sheet
Net debt/EBITDA: <2×
Interest cover: >5×
Debt/equity: preferably <50%
Current ratio: less important for many high-quality businesses
Moat
Look for:
- dominant market position
- powerful brands
- network effects
- switching costs
- economies of scale
- regulatory advantages
- recurring revenue
- pricing power
- low capital requirements
Management
I'd examine:
- ROIC over time
- acquisitions
- dilution
- buybacks
- dividend policy
- capital expenditure
- related-party transactions
- executive remuneration
Valuation
This is where I'd be particularly strict.
I'd want something like:
P/E: preferably <25
FCF yield: preferably >4–5%
PEG: preferably <2
EV/EBIT: reasonable relative to quality
DCF: meaningful margin of safety
Those aren't Buffett's literal numerical thresholds—they're practical screening thresholds based on his philosophy.
The really interesting ASX shortlist
Given the ROE + low debt + rising profits + reasonable valuation approach you've been looking at previously, I'd investigate these particularly closely:
REA — CAR — SOL — CSL — COL — WOW — SHL — IAG — QBE — ORG — TCL — ASX
But they aren't equally Buffett-like.
I'd divide the analysis into four questions:
1. "Wonderful business?"
REA, CAR, CSL, ASX
2. "Wonderful business at the right price?"
This is where valuation becomes decisive.
3. "Good business + excellent capital allocation?"
SOL is particularly interesting here because you're effectively buying a long-term capital allocator rather than one operating business.
4. "Cheap enough to compensate for a less spectacular moat?"
This is where companies such as COL, WOW, IAG or QBE become interesting.
One metric I'd add to your existing screening
You've previously focused on ROE, debt and 10-year profit growth.
I'd add:
Incremental ROIC
This asks:
"For every additional $1 the company retains, how much additional operating profit does it eventually produce?"
That's extremely Buffett-like.
A company earning 20% ROIC but unable to reinvest much capital may be less attractive than a company earning 18% ROIC that can reinvest large amounts at 18%.
Buffett has emphasized that retained earnings should ultimately create at least a corresponding increase in business value.
If I were constructing a Buffett ASX portfolio
I would therefore not simply buy the highest ROE companies.
I'd search for this combination:
High ROIC + durable moat + low debt + predictable earnings + high FCF + capable management + long reinvestment runway + reasonable valuation.
That is much closer to Buffett's actual philosophy.
And there's an important distinction between "Buffett quality" and "Buffett price."
A company can be an absolutely wonderful business and still be a poor investment if you pay too much.
The current ASX 200 contains 200 companies selected primarily by float-adjusted market capitalisation and liquidity; the September 2026 rebalance has already taken effect.
Buffett's own acquisition criteria emphasise consistent earnings, high returns on equity with little debt, understandable businesses, capable management and a sensible purchase price.
My Buffett-style ASX 200 shortlist
I've weighted:
- Economic moat — 25%
- ROIC/ROE and economics — 20%
- Balance sheet — 15%
- Earnings consistency — 15%
- Free cash flow — 10%
- Reinvestment opportunity — 5%
- Current valuation — 10%
This deliberately gives business quality more weight than today's P/E.
| Rank | ASX | Company | Buffett fit | Main reason |
|---|---|---|---|---|
| 1 | REA | REA Group | ★★★★★ | Dominant marketplace + exceptional ROIC + almost no debt |
| 2 | RMD | ResMed | ★★★★★ | Global moat, recurring healthcare demand, strong FCF |
| 3 | ALL | Aristocrat Leisure | ★★★★★ | Global competitive advantage + high ROIC + buybacks |
| 4 | CSL | CSL | ★★★★★ | Global scale, IP, plasma network, strong long-term moat |
| 5 | CPU | Computershare | ★★★★★ | Sticky infrastructure, high ROIC, recurring revenue |
| 6 | MPL | Medibank Private | ★★★★½ | High ROE/ROIC, net cash, defensive business |
| 7 | CAR | CAR Group | ★★★★½ | Marketplace/network effects + high cash generation |
| 8 | WES | Wesfarmers | ★★★★½ | Strong brands + capital allocation + diversified moat |
| 9 | IAG | Insurance Australia Group | ★★★★ | Strong balance sheet + improving returns + valuation |
| 10 | QBE | QBE Insurance | ★★★★ | Attractive valuation + improving ROE/ROIC |
| 11 | SOL | Washington H. Soul Pattinson | ★★★★ | Excellent capital allocator + conservative balance sheet |
| 12 | ASX | ASX Ltd | ★★★★ | Monopoly-like infrastructure + net cash |
| 13 | COH | Cochlear | ★★★★ | Powerful medical-device moat + exceptional balance sheet |
| 14 | PME | Pro Medicus | ★★★★ | Extraordinary economics + almost no debt |
| 15 | CBA | Commonwealth Bank | ★★★★ | Franchise strength + pricing power + high ROE |
| 16 | NAB | National Australia Bank | ★★★½ | Strong banking franchise + valuation |
| 17 | COL | Coles | ★★★½ | Essential product + scale + strong ROE |
| 18 | WOW | Woolworths | ★★★½ | Scale + recurring demand + defensive economics |
| 19 | SHL | Sonic Healthcare | ★★★½ | Global scale + healthcare demand + reasonable valuation |
| 20 | GMG | Goodman Group | ★★★½ | Exceptional property platform + structural growth |
The five that really stand out
1. REA Group — the purest Buffett business
REA Group
This is probably the clearest example of the "wonderful business" concept in the ASX 200.
Current figures are striking:
- ROE: 34.9%
- ROIC: 41.3%
- Debt/equity: 0.04
- Debt/EBITDA: 0.08×
- Net debt/EBITDA: –0.32×
- Interest coverage: 124×
- FCF yield: about 3.9%
- P/E: about 29×
And its ROIC has remained exceptionally high over recent years.
That's almost a textbook Buffett combination:
Dominant business + high returns + minimal debt + recurring cash flow.
The problem is price.
At roughly 29× earnings and 25× FCF, you're paying a substantial premium for that quality.
2. ResMed — possibly the most interesting combination
ResMed
RMD is particularly interesting because it combines:
quality + growth + reasonable valuation.
Current price is around $31.68 and trailing P/E around 20.6×, with forward P/E around 18.7×. FY2026 revenue grew about 9.9% and earnings about 8.8%.
The business also has:
- global scale
- medical-device ecosystem
- software
- recurring replacement demand
- high barriers to entry
- strong FCF
- substantial shareholder returns
That combination is very Buffett-like.
3. Aristocrat — outstanding economics
Aristocrat Leisure
ALL is one of the strongest quality + capital allocation candidates.
Current numbers:
| Metric | ALL |
|---|---|
| ROE | 22.0% |
| ROIC | 17.2% |
| Debt/EBITDA | 0.81× |
| Net debt/EBITDA | 0.54× |
| P/E | 24.6× |
| FCF yield | 4.7% |
| Dividend payout | 39% |
Its ROIC has remained in the mid-to-high teens or better for several years, while leverage has fallen dramatically from earlier levels.
The current valuation is much more interesting to me than it was when ALL traded at 30–40× earnings.
4. CSL — wonderful business, complicated numbers
CSL Limited
CSL remains one of Australia's strongest competitive businesses.
But I would not use its current ROE mechanically.
Current reported ROE is negative because of recent accounting effects, while ROIC remains 16.5%. Debt/EBITDA is about 2.1×, and the forward P/E is around 20.6×.
What's interesting is the valuation reset.
The stock has fallen dramatically from its 2024–25 valuation levels:
FY2025 market cap: ~$116bn
Current: ~$87bn
while the underlying franchise remains extremely difficult to replicate.
That's the sort of situation Buffett historically likes to investigate:
Has the price fallen substantially while the underlying economic moat remains intact?
That's a much more interesting question than simply asking whether CSL has a low P/E.
5. Computershare — the sleeper
Computershare
CPU has a combination I particularly like for this screen:
- ROE around 28%
- ROIC around 26%
- Debt/EBITDA around 1.2×
- interest coverage around 11×
- P/FCF around 20×
- forward P/E around 19×
And the underlying business has very sticky customers.
It's not a glamorous company.
That's actually part of the appeal.
Buffett has historically preferred businesses whose economics are understandable and durable rather than businesses dependent on predicting the next technological breakthrough.
The interesting value candidates
This is where the screen gets much more interesting.
QBE
QBE Insurance Group
QBE currently trades around:
11.2× earnings
and only about:
6.9× FCF
while ROE is approximately 19.3% and ROIC approximately 15.0%. Net debt/EBITDA is only about 0.64×.
That's a very different proposition from REA at ~29× earnings.
The trade-off is that insurance is inherently more complicated and cyclical, so it doesn't get the same "simple business" score.
IAG
Insurance Australia Group
IAG is another interesting value candidate:
- P/E: 18.6×
- forward P/E: 17.1×
- ROE: 15.6%
- ROIC: 12.2%
- net debt/EBITDA: 0.60×
- dividend yield: ~4.1%
It doesn't have the moat of REA or RMD, but you're paying considerably less.
And then there's MPL
Medibank Private
MPL is actually one of the most interesting results from this particular quantitative screen.
Current:
ROE: 27.2%
ROIC: 24.8%
Net debt/EBITDA: –0.30×
P/E: ~20.3×
FCF yield: ~3.8%
Dividend yield: ~4.1%
That's an unusually good combination of:
high returns + net cash + defensive business + reasonable valuation.
Its weakness is the moat: health insurance is more regulated and competitive than something like REA.
One surprising result: Coles
Coles Group
At first glance COL looks very Buffett-like:
ROE: 28.1%
But then you look underneath:
Debt/equity: 2.51×
Net debt/EBITDA: 3.53×
Interest coverage: only 3.84×
ROIC: 10.4%
So this demonstrates why Buffett would not simply screen for high ROE.
The leverage materially boosts ROE.
That's exactly why I'd put ROIC ahead of ROE in our ASX screen.
Woolworths has the same problem
Woolworths Group
WOW has:
ROE: 23.3%
but:
Net debt/EBITDA: 4.3×
ROIC: only 7.9%
P/E: ~41.6×
So despite the enormous scale and defensive business, it doesn't currently pass my strict Buffett test particularly well.
The most extreme example: Pro Medicus
Pro Medicus
PME has extraordinary business economics:
ROE: 75%
ROIC: 69%
Debt/equity: 0.01
Net debt/EBITDA: –1.27×
Those numbers are phenomenal.
But...
P/E ≈64×
P/FCF ≈133×
EV/FCF ≈131×
So PME demonstrates the difference between:
"Buffett would love the business."
and
"Buffett would buy the shares at today's price."
Those are completely different questions.
My resulting Buffett matrix
This is how I'd think about the 20:
| Company | Business | Balance sheet | Price | Overall Buffett characteristics |
|---|---|---|---|---|
| REA | ★★★★★ | ★★★★★ | ★★½ | Exceptional |
| RMD | ★★★★★ | ★★★★½ | ★★★★ | Exceptional |
| ALL | ★★★★★ | ★★★★½ | ★★★½ | Exceptional |
| CSL | ★★★★★ | ★★★★ | ★★★★ | Exceptional |
| CPU | ★★★★½ | ★★★★ | ★★★½ | Excellent |
| MPL | ★★★½ | ★★★★★ | ★★★★ | Excellent |
| CAR | ★★★★★ | ★★★½ | ★★★½ | Excellent |
| WES | ★★★★½ | ★★★ | ★★★ | Very good |
| IAG | ★★★½ | ★★★★½ | ★★★★ | Very good |
| QBE | ★★★½ | ★★★★½ | ★★★★★ | Very good |
| SOL | ★★★★½ | ★★★★½ | ★★★ | Very good |
| ASX | ★★★★ | ★★★★★ | ★★★ | Very good |
| COH | ★★★★★ | ★★★★★ | ★★ | Excellent business / expensive |
| PME | ★★★★★ | ★★★★★ | ★ | Extraordinary business / extremely expensive |
| CBA | ★★★★½ | ★★★½* | ★★★ | Very good |
| NAB | ★★★★ | ★★★½* | ★★★½ | Good |
| COL | ★★★½ | ★★ | ★★½ | Mixed |
| WOW | ★★★½ | ★★ | ★★ | Mixed |
| SHL | ★★★½ | ★★½ | ★★★★ | Good value candidate |
| GMG | ★★★★½ | ★★★ | ★★★ | Good |
*Banks require a different balance-sheet framework; conventional debt/equity comparisons aren't meaningful in the same way as for industrial companies.
But here's the part I think is most useful for you
If we combine Buffett quality AND value, rather than simply looking for the best businesses, my 2026 ASX Buffett watchlist becomes much shorter:
Group A — quality + price worth investigating now
RMD
ALL
MPL
QBE
IAG
CPU
CSL
Group B — superb businesses, but valuation needs discipline
REA
CAR
WES
COH
ASX
SOL
Group C — fantastic business, but price is the major obstacle
PME
Group D — Buffett-like businesses but balance-sheet/ROIC issues
COL
WOW
TCL
GMG
For example, Transurban has an outstanding infrastructure position, but current net debt/EBITDA is around 8.2× and ROIC only about 4.4%, which makes it a poor fit for Buffett's "high returns with little debt" acquisition criteria despite the quality of the underlying toll-road assets.
The next screen I'd do is more interesting
Given your previous focus on ROE + low debt + rising 10-year profits + valuation, I'd take these 20 and build a proper "Buffett Scorecard" with:
10-year ROE
10-year ROIC
10-year EPS CAGR
10-year FCF CAGR
number of profitable years
net debt/EBITDA
interest cover
FCF conversion
dividend growth
current P/E
10-year average P/E
current FCF yield
estimated intrinsic value
That would allow us to answer the much more useful question:
Which ASX 200 companies are simultaneously wonderful businesses AND currently trading at prices Buffett would find interesting?
That is where I suspect the list could narrow from these 20 to perhaps 5–8 genuine Buffett-style candidates.
| Company | Quality | Valuation | Balance sheet | Buffett fit | |
|---|---|---|---|---|---|
| 1 | RMD – ResMed | ★★★★★ | ★★★★½ | ★★★★★ | Exceptional |
| 2 | ALL – Aristocrat | ★★★★★ | ★★★★ | ★★★★½ | Exceptional |
| 3 | QBE – QBE Insurance | ★★★★ | ★★★★★ | ★★★★ | Very strong |
| 4 | MPL – Medibank | ★★★★ | ★★★★ | ★★★★★ | Very strong |
| 5 | CPU – Computershare | ★★★★½ | ★★★½ | ★★★★ | Very strong |
| 6 | CSL – CSL | ★★★★★ | ★★★½ | ★★★½ | Very strong |
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