The Buffett Filter: Skip Any Stock in 2026 Unless It Clears These Two Hurdles

Warren Buffett Just Handed You a Rulebook—Will You Use It?

For the first time in 60 years, Warren Buffett stepped down as CEO of Berkshire Hathaway, but don’t mistake that for a retirement. The Oracle of Omaha remains deeply involved in every major decision, and more crucially, the investment principles he’s spent decades refining are as potent as ever.

Here’s what matters right now: Buffett outlined a bulletproof framework back in 2013 that separates the stocks worth owning from the ones you should walk past. It’s simple in theory. Brutal in practice.

The Two Tests Every Stock Must Pass

In his 2013 shareholder letter to Berkshire Hathaway, Buffett and his business partner Charlie Munger revealed their exact process for deciding which stocks to buy. Strip away the jargon, and it comes down to this:

Test #1: Can you actually predict its earnings?

Buffett doesn’t play guessing games. He looks at a company and asks: Can I reasonably estimate what this business will earn over the next five years or more? Not a wild stab in the dark—a sensible, defensible projection. If the answer is no, he walks. Period.

Test #2: Is the price right?

Only if you pass Test #1 do you move to Test #2. Here’s where most investors stumble: Buffett doesn’t value a stock based on best-case earnings. He uses the lower end of his projected earnings range. If the stock looks cheap relative to that conservative estimate, it’s a buy. Otherwise, move on.

That’s it. Two steps. Millions of dollars made or saved.

Why This Is Harder Than It Sounds

The elegance of Buffett’s framework is deceptive. Understanding it takes five minutes. Actually executing it takes real discipline—and deep knowledge.

The biggest barrier? Nailing those five-year earnings projections. You need what Buffett calls “circle of competence”—industries and businesses you genuinely understand. If you can’t articulate why a company will grow (or shrink), you’re just gambling.

Even Buffett admits he’s made mistakes inside his own wheelhouse. So he mitigates risk with that second test: always value using the floor, not the ceiling. It’s a margin of safety built in.

Which Stocks Actually Pass Today?

It’s worth noting that Berkshire Hathaway has been a net seller of stocks for 12 straight quarters, hoarding cash at record levels. That tells you something: Buffett sees fewer and fewer stocks that clear his bar right now.

But they do exist.

AbbVie stands out. The pharmaceutical giant survived the Humira patent cliff—something many predicted would crush it. Yet the company is positioned to deliver strong earnings growth over the next five years. The stock trades at a reasonable valuation, throws off a 3% dividend yield, and belongs to an exclusive club: Dividend Kings (50+ years of consecutive dividend increases).

Then there’s Nucor, a steel producer that caught Buffett’s eye recently. Why? Data center boom. Infrastructure spending surge. The company’s forward P/E of 14.5 looks reasonable given its growth runway over the next half-decade. The math works.

The Real Question: Will You Actually Use This Filter?

Most investors read Buffett’s wisdom and nod along. Then they scroll Twitter, see a hot tip, and buy anyway without asking the hard questions.

Unless you’re willing to do the legwork—really understand a business, project its earnings honestly, and wait for a reasonable price—this framework won’t help you. It’s not a magic incantation. It’s a discipline.

Start in 2026 by asking one question before every stock purchase: Can I sensibly project five years of earnings for this company? If you can’t answer yes without hedging, move on. Buffett did it for decades. So can you.