Never Compromise on Business Quality
Warren says: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." Identifying the high-quality businesses from the sea of opportunities on Wall Street can be challenging. But that is exactly what Warren Buffett advises every investor to do.
Over the last half century, the investing mogul's philosophy has evolved to focus almost exclusively on purchasing high-quality companies with promising long-term opportunities for continued growth.
Incredibly, Berkshire Hathaway was one of Buffett's allegedly worst investments of all time. The textile manufacturing industry attracted Buffett because of its cheap price and nothing else. At the time, Warren believed that purchasing a stock at a sufficiently low price is always a good idea because eventually, you will be able to sell it at a profit – even if the company's performance remains mediocre.
Today, years of experience have taught the investing tycoon that "cigar butt" investing of that kind is senseless. Instead, it's best to find top-brand companies that control prices.
Coca-Cola, for example, is a dominant force in the soft drinks market. Not only is the company synonymous with quality and taste, but it charges more than other brands for essentially the same product. It has few real competitors and fits Warren's specifications as a high-quality company.
If you're looking to follow the adivce of an expert like Warren Buffett, invest in companies that offer true quality.
Your Turn: Which high-quality companies do you invest in? Share your experience with us in the comments!