Buffett Rules × Lynch Categories

Fast Growers

Risk: High Return: High

Income Statement

Gross Margin>40%

Net Income Margin>20%

EPS GrowthRising

Balance Sheet

Cash & DebtCash>Debt

Preferred StockNone

Retained EarningsGrowing

Cash Flow

Capex Margin<25%

Conservative

Conditional

All metrics must pass — no exceptions

Moderate

Buy

Strong Buffett profile + PEG ≤ 1

Aggressive

Buy

Core position — size to conviction

KILL SIGNAL: Gross Margin <40% or Capex >25% = moat is eroding

Slow Growers

Risk: Low Return: Dividends

Income Statement

Gross Margin>40%

Net Income Margin>20%

SG&A Margin<30%

Balance Sheet

Cash & DebtCash>Debt

Retained EarningsConsistent

Adj D/E Ratio<0.80

Cash Flow

Capex Margin<25%

Conservative

Buy

Dividend confirmed safe — income hold

Moderate

Watch

Only if yield beats 10yr Treasury

Aggressive

Avoid

Return ceiling too low for mandate

KILL SIGNAL: Adj D/E >0.80 or Net Income Margin <20% = dividend at risk

Stalwarts

Risk: Moderate Return: 30–50%

Income Statement

Gross Margin>40%

Net Income Margin>20%

Deprec. Margin<10%

Balance Sheet

Cash & DebtCash>Debt

Adj D/E Ratio<0.80

Treasury StockExists

Cash Flow

Capex Margin<25%

Conservative

Conditional

Only if P/E below 5yr average

Moderate

Buy

Core hold — exit at 30–50% gain

Aggressive

Conditional

Ballast only — cap at 15% portfolio

KILL SIGNAL: Any Buffett metric miss + P/E above historical range = diworsification risk

Cyclicals

Risk: High Return: Varies

Income Statement

Interest Margin<15%

Tax MarginCorp Rate

EPS GrowthNegative

Balance Sheet

Cash & DebtCash>Debt

Adj D/E Ratio<0.80

Preferred StockNone

Cash Flow

Capex MarginFalling

Conservative

Avoid

Cycle timing requires macro conviction

Moderate

Conditional

Buy only at confirmed cycle trough

Aggressive

Buy

High-conviction timing trade at trough

KILL SIGNAL: Adj D/E >0.80 at trough = bankruptcy risk, not opportunity

Turnarounds

Risk: High Return: 10×

Income Statement

Gross Margin>40%

Net Income MarginNegative

Interest Margin<15%

Balance Sheet

Cash & DebtCash>Debt

Adj D/E Ratio<0.80

Retained EarningsRebuilding

Cash Flow

Capex MarginDeclining

Conservative

Avoid

Binary outcome — permanent loss risk

Moderate

Watch

Wait for Cash>Debt + positive gross trend

Aggressive

Conditional

Max 3% position — catalyst must be specific

KILL SIGNAL: Cash < Debt with no financing path = avoid entirely regardless of thesis

Asset Plays

Risk: Moderate Return: 2–5×

Income Statement

Gross MarginSecondary

Net Income MarginSecondary

SG&A Margin<30%

Balance Sheet

Cash & DebtCash>Debt

Adj D/E Ratio<0.80

Preferred StockNone

Cash Flow

Capex Margin<25%

Conservative

Conditional

NAV discount ≥40% + no debt overhang

Moderate

Buy

NAV discount ≥30% + catalyst identified

Aggressive

Buy

Leverage position if catalyst is near-term

KILL SIGNAL: Preferred Stock exists OR Adj D/E >0.80 = assets are not yours

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