As part of one of my weekend market reviews, I decided to build a Buffett-style scanner in TrendSpider.
I wasn’t trying to turn into Warren Buffett overnight. As a technician, I spend most of my time studying price. But I also believe price tells only part of the story. Every now and then I like to step back and look at the market through a completely different framework. This time I wanted to see what today's market looked like through the eyes of a long-term value investor.
My goal was to ask a simple, practical question: If Buffett were screening today’s market for high-quality businesses at a reasonable price, how many companies would even make the first cut?
To do this, I used a modern tool to apply an old-school philosophy. I used TrendSpider’s AI sidekick feature to build a scanner based on the criteria Warren Buffett has discussed for decades, and I cross-referenced it with the criteria used by Phil Town, the author of Payback Time.
I wasn't looking for a list of stocks to buy. I was looking for a temperature check on the market environment.
The results told an interesting story.
Scarcity is the Story
Out of the entire S&P 500, only three companies met the screening criteria.
The specific companies aren't the story. The scarcity is.
What surprised me wasn't that so few companies qualified. It was that when I revisited the scan at a later date, different companies surfaced, but the broader conclusion remained the same: only a handful met the criteria. That told me the individual companies mattered far less than what the scan was revealing about the market itself.
When you apply a disciplined framework focused on consistent earnings growth, strong returns on capital, manageable debt, and, most importantly, a reasonable valuation, the list of available opportunities shrinks dramatically.
I wanted to know whether this was simply a "Buffett thing," so I built a second scan based on Phil Town's investing philosophy. Although his approach differs in several ways, it also focuses on buying high-quality businesses at attractive prices.
Different framework. Different inputs. Same conclusion.
When two independent investment philosophies rooted in buying quality at a reasonable price both produce only a handful of candidates, it isn't just an interesting screen result. It's telling us something about the current market environment.
Buffett’s Cash Position Isn’t an Accident
Berkshire Hathaway is currently holding one of the largest cash positions in its history. To the average observer, this looks like inactivity. In a world that tells you that you must always be "doing something" with your money, sitting on a mountain of cash feels like a missed opportunity.
But that isn't inactivity. That’s positioning.
Buffett has always emphasized the "fat pitch": the idea that in investing, you don't have to swing at every ball. You can wait for the one that is right in your sweet spot. When the odds are clearly in his favor, he swings big. When they aren't, he waits.
Seen through this lens, his cash position is consistent with the scan results I just described. If the criteria for "value" aren't being met, he doesn't lower his standards. He preserves capital and waits for conditions to change.
What This Doesn’t Mean
It is easy to look at a scan like this and jump to a dark conclusion. But let's be clear about what these results do not mean:
- It doesn't mean the market is about to crash. Markets can stay expensive, or even overvalued, much longer than most investors have the patience to wait. As the old saying goes, markets can remain irrational longer than you can remain solvent.
- It doesn't mean expensive stocks can't become even more expensive. Liquidity, momentum, and investor enthusiasm can continue pushing prices higher long after valuations appear stretched.
- It doesn't mean you should stop investing altogether. It simply suggests that opportunities meeting disciplined value criteria are becoming harder to find, making selectivity and patience more important than ever.
What it does mean is that the margin for error has shrunk. It tells us that the "easy" quality businesses: the ones that are both great companies and great prices: have become incredibly hard to find.
Why That Matters: The Risk Spectrum
When value becomes scarce, it changes the behavior of everyone in the system.
Over the past several years, we have lived through an era of sustained liquidity. When investors struggle to find value, many don't simply stop investing. They begin accepting higher prices, lower-quality businesses, or greater risk in search of returns. That's how risk slowly works its way into the system.
I've explored this idea further throughout my Invisible Leverage series, where I discuss how abundant liquidity can quietly encourage investors to take on risks they don't fully recognize.
In environments like this, the market can appear invincible. But that strength is often a function of positioning and liquidity, not necessarily underlying value. When the market's structure is built on the assumption that "prices only go up," the reaction to any pressure can be much faster and more pronounced than people expect.
The Technician’s Edge
I approach the market primarily as a technician. I focus on price action, structure, and key levels because that is where the market reveals its truth in real time.
However, understanding the environment in which those prices exist is what gives a technician an edge. It helps you distinguish between a move built on solid ground and a move built on "invisible" leverage and excess liquidity.
Sometimes, what looks like strength is just the result of everyone being forced into the same few trades because nothing else qualifies. The goal isn't to follow the crowd, but to understand why the crowd is moving in the first place.
Final Thoughts: The Power of the Wait
The takeaway from a Buffett-style scan isn't that you should sell everything and hide. The takeaway is about discipline.
One of the greatest advantages of investing isn't the ability to predict the future. It’s having the discipline to wait when the odds aren't in your favor. Whether you are a value investor like Warren Buffett or a technician like me, the principle is remarkably similar, you don’t have to swing at every pitch.
Sometimes, the best investment decision you can make isn't what you buy, it's what you choose not to buy. Protecting your capital when opportunities are scarce ensures you'll have the flexibility to act when better opportunities eventually appear.
One lesson I've learned, both in trading and in business, is that discipline isn't just about knowing when to act. It's also about knowing when to wait. Sometimes the best opportunities come not from doing more, but from having the patience to let the right opportunity come to you.
Frequently Asked Questions
What are Warren Buffett’s main investment criteria?
While Buffett has never published a fixed checklist, he has consistently emphasized businesses with durable competitive advantages ("economic moats"), capable management, strong financial performance, and prices that provide a margin of safety.
Why does Warren Buffett hold so much cash?
Buffett has consistently said he prefers to invest when he believes businesses are selling at attractive prices. Berkshire Hathaway's unusually large cash position suggests he has not recently found enough opportunities that meet his investment standards.
How does Phil Town’s "Payback Time" work?
Phil Town's Payback Time estimates how many years of a company's earnings or free cash flow it would take to recover the price paid for the business. His approach generally seeks opportunities with relatively short payback periods.
Does a lack of "Buffett stocks" mean a crash is coming?
No. It simply suggests that companies meeting a particular value-investing framework are relatively scarce. Markets can remain expensive for long periods, especially when liquidity and investor optimism remain strong.
Why would a technical trader use a Buffett-style stock screen?
Because technical analysis and fundamental analysis answer different questions. Price tells me what the market is doing. A Buffett-style screen helps me understand the broader environment in which those prices exist. Looking at both provides additional perspective.
Markets reward patience far more often than they reward activity.
Clarity creates better decisions.
Bill Fister is the author of The Blue-Collar Trader: Where Hard Work Meets Smart Money and The American Dream Derailed: How Debt & Deception Shape Our Lives and How We Reclaim Control. Drawing on decades of experience in the trades, business ownership, leadership, and the financial markets, he helps working-class people better understand money, risk, systems, and opportunities so they can build greater clarity, stability, and independence.
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