{"id":21260,"date":"2024-02-22T17:28:40","date_gmt":"2024-02-22T09:28:40","guid":{"rendered":"https:\/\/www.tejwin.com\/?post_type=insight&#038;p=21260"},"modified":"2024-04-08T10:43:56","modified_gmt":"2024-04-08T02:43:56","slug":"buffetts-business-investment-rules","status":"publish","type":"insight","link":"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/","title":{"rendered":"TQuant Lab Warren E. Buffett&#8217;s Business Investment Rules"},"content":{"rendered":"\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-34.jpeg\" alt=\"Buffett's Business Investment Rules\" class=\"wp-image-21219\" style=\"aspect-ratio:1.5;object-fit:cover\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-34.jpeg 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-34-300x200.jpeg 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-34-150x100.jpeg 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-34-768x512.jpeg 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Photo by <a href=\"https:\/\/unsplash.com\/@homajob\" class=\"ek-link\" target=\"_blank\" rel=\"noopener\">Scott Graham<\/a> on <a href=\"https:\/\/unsplash.com\/\" class=\"ek-link\" target=\"_blank\" rel=\"noopener\">Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69f4dd8900c6c\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69f4dd8900c6c\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Highlight\" >Highlight<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Preface\" >Preface<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Buffetts_Business_Investment_Rules_%E2%80%93_Five_Main_Stock_Selection_Criteria\" >Buffett&#8217;s Business Investment Rules \u2013 Five Main Stock Selection Criteria<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Coding_Environment\" >Coding Environment<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Financial_Data_Collection\" >Financial Data Collection<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Target_Screening\" >Target Screening<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#TQuant_Lab_Buy_Hold_Strategy\" >TQuant Lab Buy &amp; Hold Strategy<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Data_Import\" >Data Import<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Trading_Rules\" >Trading Rules<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Execute_the_Trading_Strategy\" >Execute the Trading Strategy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Performance_Evaluation_by_Pyfolio\" >Performance Evaluation by Pyfolio<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Source_Code\" >Source Code<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tejwin.com\/en\/insight\/buffetts-business-investment-rules\/#Extended_Reading\" >Extended Reading<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Highlight\"><\/span>Highlight<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Article Difficulty: \u2605\u2605\u2606\u2606\u2606<\/li>\n\n\n\n<li>This article is adapted from <a href=\"https:\/\/www.tejwin.com\/en\/insight\/warren-e-buffetts-value-investing\/\" class=\"ek-link\">Warren E. Buffett\u2019s Value Investing<\/a>, using TejToolAPI to fetch the financial data required for Buffett&#8217;s Business Investment Rules. After organizing the data, targets that meet the criteria of Business Investment Rules are identified.<\/li>\n\n\n\n<li>Utilizing TQuant Lab to buy and hold targets that align with the Business Investment Rules for one year ( 2023 ), observing their risk and return performance.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Preface\"><\/span>Preface<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Warren E. Buffett adhered to rational investment principles throughout his lifetime. His Business Investment Rules stress investing with the mindset of acquiring a whole business rather than simply investing in stocks.<\/p>\n\n\n\n<p>This article selects five critical stock selection criteria from Buffett\u2019s Business Investment Rules. From utilizing&nbsp;<a href=\"https:\/\/github.com\/tejtw\/TQuant-Lab\/blob\/main\/lecture\/Data%20Preprocess%20-%20tejtoolapi.ipynb\" target=\"_blank\" rel=\"noreferrer noopener\">TejToolAPI<\/a>&nbsp;to fetch financial data and screen targets to using TQuant Lab to backtest investment risks and performance, we will explore Buffett\u2019s investment style and appreciate the ability of Business Investment Rules to generate excess returns.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Buffetts_Business_Investment_Rules_%E2%80%93_Five_Main_Stock_Selection_Criteria\"><\/span>Buffett&#8217;s Business Investment Rules \u2013 Five Main Stock Selection Criteria<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Because certain aspects of Buffett&#8217;s Business Investment Rules are non-quantifiable, we have chosen only the quantifiable stock selection criteria, all rooted in the underlying principle of a company&#8217;s ability to generate profits for its shareholders. The stock selection criteria are as follows:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Return on equity for the latest fiscal year &gt; the industry average.<\/li>\n\n\n\n<li>3-year average return on equity &gt; 15%.<\/li>\n\n\n\n<li>Gross margin for the latest fiscal year &gt; the industry average.<\/li>\n\n\n\n<li>( Market value increase over 7 years \/ retained earnings increase over 7 years ) &gt; 1.<\/li>\n\n\n\n<li>( Free cash flow for the latest fiscal year \/ free cash flow 7 years ago ) &#8211; 1 &gt; 1.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Coding_Environment\"><\/span>Coding Environment<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This article is written using Windows 11 and Jupyter Lab as the editor.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Financial_Data_Collection\"><\/span>Financial Data Collection<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>By importing the basic packages and inputting the API key, we can access the TEJ financial database.<\/p>\n\n\n\n<pre class=\"wp-block-code\"><code>import os\nimport numpy as np\nimport pandas as pd\n\n# tej_key\ntej_key = 'your key'\napi_base = 'https:\/\/api.tej.com.tw'\n\nos.environ&#91;'TEJAPI_KEY'] = tej_key \nos.environ&#91;'TEJAPI_BASE'] = api_base<\/code><\/pre>\n\n\n\n<p>Before we access the TEJ database, we use the <code>get_universe()<\/code> function to get our stock pool. In this case, we have chosen ordinary shares listed by the end of 2015 while excluding highly leveraged financial industries.<\/p>\n\n\n\n<pre class=\"wp-block-code\"><code>from zipline.sources.TEJ_Api_Data import get_universe\n\npool = get_universe(start = '2015-12-31', \n                    end = '2015-12-31',  \n                    mkt_bd_e = 'TSE',  # listed stocks in TWSE\n                    stktp_e = 'Common Stock',  \n                    main_ind_e = 'General Industry') # general industry can exclude financial industry<\/code><\/pre>\n\n\n\n<p>Then, we use TejToolAPI to collect the following financial items required in the Business Investment Rules.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Industry<\/li>\n\n\n\n<li>Return on equity<\/li>\n\n\n\n<li>Gross margin<\/li>\n\n\n\n<li>Market value<\/li>\n\n\n\n<li>Retained earnings<\/li>\n\n\n\n<li>Cash flow from operating activities<\/li>\n\n\n\n<li>Cash flow from investing activities<\/li>\n<\/ol>\n\n\n\n<p class=\"has-text-align-left\">Note: The cash flow from operating activities and the cash flow from investing activities can be used to calculate free cash flow.<\/p>\n\n\n\n<pre class=\"wp-block-code\"><code>import TejToolAPI\n\nstart_time = pd.Timestamp('2015-12-31')\nend_time = pd.Timestamp('2022-12-30') \n\ndata = TejToolAPI.get_history_data(start = start_time,\n                                   end = end_time,\n                                   ticker = pool,\n                                   fin_type = 'A', # Cumulative data\n                                   columns = &#91;'Industry_Eng', 'Return_Rate_on_Equity_A_percent', 'Gross_Margin_Rate_percent', 'Market_Cap_Dollars', 'Total_Retained_Earnings', 'Cash_Flow_from_Operating_Activities', 'Cash_Flow_from_Investing_Activities'])<\/code><\/pre>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img decoding=\"async\" width=\"1045\" height=\"525\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/data-3.png\" alt=\"Buffett's Business Investment Rules\" class=\"wp-image-21269\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/data-3.png 1045w, https:\/\/www.tejwin.com\/wp-content\/uploads\/data-3-300x151.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/data-3-1024x514.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/data-3-150x75.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/data-3-768x386.png 768w\" sizes=\"(max-width: 1045px) 100vw, 1045px\" \/><figcaption class=\"wp-element-caption\">The Overall Financial Data Extracted from TejToolAPI<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Target_Screening\"><\/span>Target Screening<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>After data analysis, we can obtain our final 17 targets that meet all the five stock-selecting criteria.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img decoding=\"async\" width=\"375\" height=\"543\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/targets.png\" alt=\"Buffett's Business Investment Rules\" class=\"wp-image-21271\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/targets.png 375w, https:\/\/www.tejwin.com\/wp-content\/uploads\/targets-207x300.png 207w, https:\/\/www.tejwin.com\/wp-content\/uploads\/targets-104x150.png 104w\" sizes=\"(max-width: 375px) 100vw, 375px\" \/><figcaption class=\"wp-element-caption\">Targets that Meet the Five Criteria<\/figcaption><\/figure>\n\n\n\n<div style=\"border: 1px black; border-style: solid none; text-align: center; border-color: #296580; padding: 24px; margin-top: 24px; margin-bottom: 24px;\">\n<p style=\"margin: 0px; font-size: 24px; font-weight: bold; line-height: 1.5;\">Build Profitable Investment Portfolios With Financial Data!<\/p>\n<div style=\"margin-top: 32px;\"><strong><a style=\"border: none; border-radius: 4px; background-color: #296580; color: white; font-size: 20px; width: fit-content; text-decoration: none; padding: 12px 30px 12px 30px;\" href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/financial-data\/\">TEJ Financial Databank<\/a><\/strong><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"TQuant_Lab_Buy_Hold_Strategy\"><\/span>TQuant Lab Buy &amp; Hold Strategy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Next, we use TQuant Lab to execute a buy-and-hold strategy for the above targets for one year ( 2023 ) and observe the risk and return performance.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Data_Import\"><\/span>Data Import<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Data Period: January 1, 2023, to December 31, 2023<\/p>\n\n\n\n<p>We import the price data of the 17 targets and the TAIEX-Total Return Index ( IR0001 ) to be the benchmark of our backtest.<\/p>\n\n\n\n<pre class=\"wp-block-code\"><code>start = '2023-01-01'\nend = '2023-12-31'\n\nos.environ&#91;'mdate'] = start + ' ' + end\nos.environ&#91;'ticker'] = ' '.join(tickers) + ' ' + 'IR0001'\n\n!zipline ingest -b tquant<\/code><\/pre>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Trading_Rules\"><\/span>Trading Rules <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>On January 1, 2023, evenly allocate assets to purchase the targets and hold them until the end of the backtesting period.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Execute_the_Trading_Strategy\"><\/span>Execute the Trading Strategy<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>We executed the configured Buy &amp; Hold strategy with the trading period from 2023-01-01 to 2023-12-31 and with the initial capital of 10,000,000 NTD. The output, or&nbsp;<code>results<\/code>, will represent the daily performance and detailed transaction records.<\/p>\n\n\n\n<pre class=\"wp-block-code\"><code>from zipline import run_algorithm\n\nstart_date = pd.Timestamp(start, tz = 'utc')\nend_date = pd.Timestamp(end, tz = 'utc')  \ncapital_base = 1e7\n\nresults = run_algorithm(\n    start = start_date,\n    end = end_date,\n    initialize = initialize,\n    handle_data = handle_data,\n    analyze = analyze,\n    bundle = 'tquant',\n    capital_base = capital_base,\n)\nresults<\/code><\/pre>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"1031\" height=\"497\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/results.png\" alt=\"Buffett's Business Investment Rules\" class=\"wp-image-20966\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/results.png 1031w, https:\/\/www.tejwin.com\/wp-content\/uploads\/results-300x145.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/results-1024x494.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/results-150x72.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/results-768x370.png 768w\" sizes=\"(max-width: 1031px) 100vw, 1031px\" \/><figcaption class=\"wp-element-caption\">Transaction Details<\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Performance_Evaluation_by_Pyfolio\"><\/span> Performance Evaluation by Pyfolio<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"1065\" height=\"554\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/per-ret.png\" alt=\"Buffett's Business Investment Rules\" class=\"wp-image-21208\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/per-ret.png 1065w, https:\/\/www.tejwin.com\/wp-content\/uploads\/per-ret-300x156.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/per-ret-1024x533.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/per-ret-150x78.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/per-ret-768x400.png 768w\" sizes=\"(max-width: 1065px) 100vw, 1065px\" \/><figcaption class=\"wp-element-caption\">Backtest Performance and the Comparison with benchmark<\/figcaption><\/figure>\n\n\n\n<p>From the chart above, we can see that in 2023, the overall market is bull, with a market return of around 30%. However, the targets selected by Buffett&#8217;s Business Investment Rules outperform the market by approximately 20 percentage points, achieving a cumulative return of 51.525%. Additionally, the portfolio&#8217;s Alpha value is 0.24, and the Beta value is 0.8, indicating that Buffett&#8217;s Business Investment Rules not only bear less systematic risk than the market but also generate excess returns.<\/p>\n\n\n\n<p>Furthermore, we plotted the Sharpe ratio chart below to observe whether Buffett&#8217;s Business Investment Rules can achieve higher excess returns under the same level of risk exposure.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full caption-align-center\"><img loading=\"lazy\" decoding=\"async\" width=\"571\" height=\"407\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/sharpe.png\" alt=\"Buffett's Business Investment Rules\" class=\"wp-image-20998\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/sharpe.png 571w, https:\/\/www.tejwin.com\/wp-content\/uploads\/sharpe-300x214.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/sharpe-150x107.png 150w\" sizes=\"(max-width: 571px) 100vw, 571px\" \/><figcaption class=\"wp-element-caption\">Sharpe Ratio Comparison Chart<\/figcaption><\/figure>\n\n\n\n<p>Observing the chart above, we can see that the Sharpe ratios of the portfolio based on Buffett&#8217;s Business Investment Rules mostly exceed the market, averaging around 2.4. Therefore, the Business Investment Rules indeed assist us in earning higher returns than the market under a certain level of risk.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In this implementation, we utilized the five primary stock selection criteria of Buffett&#8217;s Business Investment Rules, combined with TejToolAPI for fundamental stock selection. We then conducted a one-year backtesting performance analysis using TQuant Lab. From the analysis results, whether the return rate, Alpha, Beta, or Sharpe ratio, Buffett&#8217;s Business Investment Rules demonstrated excellent stability and the ability to earn excess returns. No wonder this set of principles has stood the test of time.<\/p>\n\n\n\n<p>The author believes the remarkable aspect of Buffett&#8217;s Business Investment Rules is that many investors lose their rationality due to short-term market fluctuations, leading to premature exits and missing out on potential returns. In contrast, Buffett&#8217;s Business Investment Rules teach us that by carefully selecting outstanding stocks based on the profit characteristics of each company before investing and holding them for the long term, we can confidently achieve excess returns.<\/p>\n\n\n\n<p>Please note that <strong>the strategy and target discussed in this article are for reference only and do not constitute any recommendation for specific commodities or investments<\/strong>. In the future, we will also introduce using the TEJ database to construct various indicators and backtest their performance. Therefore, we welcome readers interested in various trading backtesting to consider purchasing relevant solutions from\u00a0TQuant Lab. With our high-quality databases, you can construct a trading strategy that suits your needs.<\/p>\n\n\n\n<div style=\"height:19px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-a89b3969 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-100 has-custom-font-size\" style=\"font-size:21px\"><a class=\"wp-block-button__link has-background has-text-align-center wp-element-button\" href=\"https:\/\/www.tejwin.com\/en\/databank-solution\/financial-data\/\" style=\"border-radius:14px;background:linear-gradient(135deg,rgb(240,215,106) 0%,rgb(75,209,200) 50%,rgb(76,132,205) 100%)\"><strong>Build Profitable Investment Portfolios With Financial Data.<br>Explore TEJ Financial Databank Today!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:19px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Source_Code\"><\/span>Source Code<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/github.com\/tejtw\/TEJAPI_Python_Medium_Application\/blob\/main\/Buffett&#039;s%20Business%20Investment%20Rules.ipynb\" target=\"_blank\" aria-label=\" (opens in a new tab)\" rel=\"noreferrer noopener\" class=\"ek-link\">Click Here to Github<\/a><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Extended_Reading\"><\/span>Extended Reading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-28f84493 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-tej wp-block-embed-tej\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"wp-embedded-content\" data-secret=\"tDXhI063I2\"><a href=\"https:\/\/www.tejwin.com\/en\/insight\/warren-e-buffetts-value-investing\/\">Warren E. Buffett\u2019s Value Investing<\/a><\/blockquote><iframe class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;Warren E. Buffett\u2019s Value Investing&#8221; &#8212; TEJ\" src=\"https:\/\/www.tejwin.com\/en\/insight\/warren-e-buffetts-value-investing\/embed\/#?secret=RhvZOloRFY#?secret=tDXhI063I2\" data-secret=\"tDXhI063I2\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe>\n<\/div><\/figure>\n<\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-tej wp-block-embed-tej\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"wp-embedded-content\" data-secret=\"aGYQT6IMnB\"><a href=\"https:\/\/www.tejwin.com\/en\/insight\/the-investment-strategy-of-trinity-investment-management\/\">The investment strategy of Trinity Investment Management<\/a><\/blockquote><iframe class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;The investment strategy of Trinity Investment Management&#8221; &#8212; TEJ\" src=\"https:\/\/www.tejwin.com\/en\/insight\/the-investment-strategy-of-trinity-investment-management\/embed\/#?secret=gQX0Q0hN0J#?secret=aGYQT6IMnB\" data-secret=\"aGYQT6IMnB\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe>\n<\/div><\/figure>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>This article selects five critical stock selection criteria from Buffett\u2019s Business Investment Rules. From utilizing\u00a0TejToolAPI\u00a0to fetch financial data and screen targets to using TQuant Lab to backtest investment risks and performance, we will explore Buffett\u2019s investment style and appreciate the ability of Business Investment Rules to generate excess returns.<\/p>\n","protected":false},"featured_media":21012,"template":"","tags":[2572,2371,2988,2989,2388,2700,2537],"insight-category":[690,50,1356],"class_list":["post-21260","insight","type-insight","status-publish","has-post-thumbnail","hentry","tag-data-analysis","tag-python","tag-quantitative-analysis","tag-quantitive-analysis","tag-tquant-lab","tag-2700","tag-2537","insight-category-data-analysis","insight-category-fintech","insight-category-tquant-lab-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/21260","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight"}],"about":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/types\/insight"}],"version-history":[{"count":22,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/21260\/revisions"}],"predecessor-version":[{"id":22532,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/21260\/revisions\/22532"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media\/21012"}],"wp:attachment":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media?parent=21260"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/tags?post=21260"},{"taxonomy":"insight-category","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight-category?post=21260"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}