JEFMS Journal

ABSTRACT:

This study is intended to investigate whether the Indonesian Reference Index, in this case, the LQ 45, consistently applies the principles of prudent investment, known as the Buffettology principle. Buffettology which is a derivative of its predecessor Benjamin Graham, has several characteristics or yardsticks in investment and financial decisions. Buffettology which requires a careful choice of companies or stocks, in terms of the Debt to Equity ratio, should be below 0.5 and have current assets to current debt ratio above 1.5. Another thing is to choose a company with an undervalued category but has good prospects. This study takes a research sample of 32 companies that are members of the LQ-45 option outside the banking sector that are traded on the Indonesian Stock Exchange for a period from 2010 to 2021. This study finds that the Debt to Equity ratio variable greatly affects stock returns and Net profit margin. with a negative effect. This means that the smaller the value of the D/E ratio, the higher the company's return . The natural Quick ratio variable, which is defined as the ratio of current assets to current liabilities, also significantly affects stock returns. The NPM variable also affects the company's return positively. In this case, investors' expectations of companies that have low D/E are more considered to have prospects as good companies in the future, in addition to the high ratio of Quick ratio and NPM ratio. The managerial implication of this research is the need for financial services authorities to pay attention to excessive company performance in debt expansion.

KEYWORDS:

Buffettology, Index LQ-45, Indonesian Stock Exchange

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