 Good day fellow investors. Now Warren Buffett is famous for saying that the best thing an investor can do is find a wonderful business and then pay a fair price for it. However, I ask myself, is it possible to find in this environment where the price earnings ratio of the SAP 500 is 24 something, thus giving an earnings yield of 4%, is it possible to find a wonderful business at a fair price? So in this video we'll discuss what a wonderful business is, what would be a fair price in relation to the risk of buying a wonderful business and then look at sector valuations, individual stock valuations and global valuations in order to see where should we look for a wonderful business. So let's immediately start with Buffett's criteria for a wonderful business, his acquisition criteria for Berkshire. First, it has to be a large company with more than 75 million in pre-tax earnings. This means that he's looking for market capitalization of at least one billion with current valuations. Secondly, the company needs to have demonstrated consistent earning power. He doesn't trust promises and growth, so he really looks for what happened in the past, consistency and stability. Tesla, Amazon and such companies are out of the question. The third criterion requires the business to earn good earnings with little or no depth, so a wonderful business doesn't need that because it has plenty of cash to finance its own activities. Good management, of course, if there are stable earnings in the past, it means that they have a good management and a simple business without too much technology. Because technology, as we know, is easily disrupted. So I think we all understand what a wonderful business is. Now let's see what would be a fair price for that business. In my opinion, a fair price would be a price that is good for the risk that you take when you're investing in stocks and gives a good personal yield, good personal return. My personal minimum return is 10%. However, some people have it a little bit lower, so let's first see what's the risk when investing in stocks and then come to a minimum fair price valuation. In this figure, we can see that the stock market fell more than 30% in five occasions in the last 47 years. So if the stock market falls 40% every seven years, just to cover that decline, so with no return, you need an average 5% return over seven years. Additionally, the number of years with declines of about 10% were 21 out of the 37 since 1980. On average, the yearly stock market decline was 14%. So in such an environment, which is a very risky environment, where on average stocks decline 14% in a year, forget about what's going on in the last two years. Think about, okay, the stock market can decline 14% in one year or 40% in one year every seven years. So that's a huge risk to take into account. So in order to cover for those declines, you need a 5% return at least. In addition, for the yearly declines, stocks always need a premium because you don't want to end up at zero, you want more. I would say that a fair price to pay for a wonderful business, this is a business that will grow in the future that stable low risk is at least 7%. So I need an earnings yield of at least 7%. As an earnings yield of 7% and then I need stable past earnings. So I'm looking at cyclically adjusted price earnings ratio of around 14 and below that will give me 7% now and from a wonderful business growth in the future. Now let's look at what the SAP 500 has to offer sector by sector. In this case, the sector analysis of the SAP 500 shows that K-pracials are all above 20, with the average K-pracial being 30. However, energy and industrials have lower K-pracials. Healthcare also very, very, very good K-pracials. So there is potential to find lower K-pracials. In order to look for wonderful companies at a low fair price, I have looked at the SAP 500 companies with the currently lowest PE ratio. It is a start, so let's see what I found. Companies usually have PE ratios because they are in trouble or there has been a one-off event that increased earnings, for example with eBay. Nevertheless, there are companies out of the 25 lowest SAP 500 PE ratios that have low K-pracials. General Motors, in this case, I didn't include 2009 and their bankruptcy. Then we have Navient. Only short-term earnings are in stock, but their K and their PE is very low. So people who are interested in financials should look at the risk reward and see if that is a wonderful business. Viacom has also low PE, Lionel Chemicals also a low K-pracial and call the retail company has also K-pracial. So as in this table, there are five companies that have low K-pracials. I think that looking also in a broader environment, not just the SAP 500, it's possible to find five, ten businesses that are wonderful businesses at a fair price. So it is possible. However, you really have to dig deep. Perhaps even one of the five companies I mentioned here is a wonderful business. A look at global K-pracials, we can still see Brazil a little bit cheap, Turkey is cheap and Russia is the cheapest of them all. China is now around 15. Okay, growth in China, it's not that cheap anymore. Italy and Spain have their own systemic risks. So you can take a look if you find a global company cheaply priced there, but it's very dangerous. Nevertheless, we have found potential in the States, which means that there is plenty more potential around the world. So there is potential to find wonderful businesses at the fair price now. However, Warren Buffett has $100 billion in cash sitting on the balance sheet waiting for wonderful businesses at the fair price. So he's still waiting. He hasn't made an acquisition in a while, a significant one. So lots of due diligence, lots of work is necessary, but I think it's possible. And that's what we are looking for in this channel. Finding low risk, perhaps not so wonderful businesses depending on the price. So I'm willing to buy a fair business at a wonderful price. I will also discuss in the future Buffett's purchases. They're not so wonderful. He bought into terrible businesses and then waited for the turnaround and so it's very interesting to see how what he says and what he does is completely the opposite. So keep that in mind when listening to Buffett. And of course, the question about the pricing is debatable. It is the 7% yield, 10% yield, 12% yield. That is something I'll leave up to you and I would love to hear your comments on that in the comment section below. Click like if you like the content, subscribe if you haven't subscribed yet and I'll see you in the next video.