As the world's third-richest person and most celebrated investor, Warren Buffett attracts a lot of attention. Thousands try to glean what they can from his thinking processes and track his investments.

We can't know for sure whether Buffett is about to buy Whole Foods Market (NYSE: WFM) -- he hasn't specifically mentioned anything about it to me -- but we can discover whether it's the sort of stock that might interest him. Answering that question could also reveal whether it's a stock that should interest us. In this series, we do just that.

Writing in a recent 10-K, Buffett lays out the qualities he looks for in an investment. In addition to adequate size, proven management, and a reasonable valuation, he demands:

  1. Consistent earnings power
  2. Good returns on equity with limited or no debt
  3. Management in place
  4. Simple, non-techno-mumbo-jumbo businesses

Does Whole Foods meet Buffett's standards?

1. Earnings power
Buffett is famous for betting on a sure thing. For that reason, he likes to see companies with demonstrated earnings stability.

Let's examine Whole Foods' earnings and free cash flow history:

Wfm

Source: S&P Capital IQ. 

Whole Foods' earnings have increased considerably over the years. Its free cash flow has fluctuated a bit depending on how much the company has been investing in new and existing stores.

2. Return on equity and debt
Return on equity is a great metric for measuring both management's effectiveness and the strength of a company's competitive advantage or disadvantage -- a classic Buffett consideration. When considering return on equity, it's important to make sure a company doesn't have an enormous debt burden, because that will skew your calculations and make the company look much more efficient than it is.

Whole Foods generated a return on equity of 13%, or 11% on average over the past five years. That's not enormous in the grand scheme of things, but it's fairly impressive for a grocer and for the fact that the company carries almost no debt. (Safeway, for instance, generates slightly smaller returns on equity while carrying a debt-to-equity ratio of 147%).

3. Management
CEO John Mackey has been at the job since he co-founded Safer Way, which would eventually become Whole Foods, in 1978. In 2010, he was joined by Walter Robb, Whole Foods' former chief operating officer, as co-CEO.

4. Business
The grocery business isn't particularly susceptible to wholesale technological disruption.

The Foolish conclusion
So is Whole Foods a Buffett stock? Perhaps. Although Whole Foods' return on equity may not be enormous on an absolute basis, it's impressive in context. The company also exhibits several of the other quintessential characteristics of a Buffett investment: consistent or growing earnings, tenured management, and a technologically straightforward business.

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