Mr. Buffett has four significant stock investing principles that summarize some of his core beliefs that are inherent in many of his favorite quotes. Mr. Buffett’s principles describe the kind of business he would be attracted to, which should have an enduring “moat.” Other investors can, therefore, apply his principles while planning on venturing into a business.
The principles that Mr. Buffett applies in his investments include; a business he understands by evaluating and selecting companies within his circle of competence. He has a firm with long-term prospects for his favorite holding period is forever. He operates a business alongside able and trustworthy management since reputation is the essential asset and finally a company available at a desirable price. These principles help him in selecting an industry that will bring him great an investment.
Mr. Buffet and Charlie buy a whole company, shares with the owners by owning more of shares at least 80% or purchase small portions of a great business by way of stock market purchases where control-type purchases of quality aren’t available. They use the enduring criteria to select companies by ruling out companies in industries prone to rapid and continuous change since this precludes investment certainty. They also use this criterion to eliminate businesses whose success depends on having a great manager since this doesn’t deem the business great rather the manager. They seek a stable industry with a long-term competitive advantage and if it comes with rapid organic growth, the better.
Mr. Buffett’s principles can be used by other investors to create their investments. To apply this principle, one must, stay within their circle of competence by selecting companies. He seeks for companies with an honest reputation and no involvement in fraud; he ensures the stock of the company is at least reasonably priced, with a margin of safety.
Mr. Buffet’s principles have helped him and other investors when selecting a business that will bring a significant profit. He buys a company and uses its earnings to buy a similar business elsewhere hence the rule you don’t have to invest money where you have earned it.