I recently finished putting together my investment philosophy, a framework shaped by years of studying what makes great businesses thrive and how long-term investors can build wealth through the power of compounding. You can read the full breakdown at here, but at its core, my approach centers on buying quality companies at fair prices and allowing time to do the heavy lifting.
Not long after publishing it, I decided to revisit Warren Buffett’s shareholder letters—something I’ve done many times over the years. This time, I also reread the notes I had taken on those letters, collected over multiple readings. That process clarified something I hadn’t fully appreciated before. Buffett didn’t just influence aspects of my thinking. His writing helped shape the very foundation of my approach to investing.
Instead of sharing a collection of Buffett quotes from his annual letters to Berkshire shareholders, I have organized 10 of his most influential ideas (for me) into five core principles. These concepts guide how I evaluate businesses, manage risk, and construct a portfolio built for long-term compounding.
1. Prioritize Business Quality Over Superficial Value
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” (1989)
“A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital.” (2007)
These two quotes fundamentally changed how I approach investing. Early in my journey, I focused too much on companies that looked statistically cheap—low P/E ratios, discounted assets, and unloved sectors. But cheap doesn’t always mean undervalued. Often, it just means low quality.
Buffett credits Charlie Munger for this shift in thinking, but I credit Buffett himself for pushing me to value quality before price. Today, I place far more weight on the strength and durability of a company’s competitive advantage. Moats come in different forms: brand power, switching costs, network effects, or regulatory barriers; But each serves the same function: they preserve pricing power and protect returns on capital.
When I study companies now, I spend more time understanding industry dynamics and management’s ability to sustain an advantage than debating whether a stock trades at 15 or 18 times earnings. A wonderful business at a fair price will compound far better than a mediocre one bought at a discount. That single shift in thinking changed how I view almost everything in public markets.
2. Seek Opportunity in Market Pessimism
“…a great investment opportunity occurs when a marvelous business encounters a one-time huge, but solvable, problem.” (1989)
“Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.” (2004)
These insights highlight the most profitable conditions for long-term investors. Buffett’s observation that solvable problems often create mispriced assets.
The key distinction is whether a problem is solvable or existential. Businesses facing regulatory pressure, one-time impairments, or leadership transitions may suffer short-term headwinds. But if the core thesis remains intact, market pessimism can become a gift for patient investors.
Buffett’s second quote reinforces that mindset. Pessimism often brings prices far below intrinsic value. Euphoria, on the other hand, tends to erase discipline. Therefore, it remains critical to think rationally and stay focused on fundamentals even when the headlines suggest panic or mania.
3. Valuation Discipline
“…we insist on a margin of safety in our purchase price.” (1992)
“Just as regularly, we tell you that what counts is intrinsic value, a number that is impossible to pinpoint but essential to estimate.” (1994)
Even when buying quality, price matters. Buffett borrowed the concept of a margin of safety from Ben Graham, but he applied it in a modern context. The margin of safety principle isn’t about being cheap for the sake of cheap. It’s about leaving room for error. No matter how thorough your analysis, things generally do not go as planned. A margin of safety gives you a buffer in those cases.
Buffett also reminds us that intrinsic value cannot be measured with precision, but it still must be estimated. And so, the goal is not to arrive at a perfect number. Instead, the goal is to understand the narrative, the risks, and determine whether the price offers reasonable upside.
For me this means using models to determine valuation ranges based on conservative assumptions. I’m less concerned about hitting a precise target than I am about avoiding situations where optimism is already priced in. As Buffett put it, “it’s better to be approximately right than precisely wrong.”
4. Stay Within Your Circle of Competence
“We try to stick to businesses we believe we understand. That means they must be relatively simple and stable in character. If a business is complex or subject to constant change, we’re not smart enough to predict future cash flows.” (1992)
“…if you are a know-something investor, able to understand business economics and to find five to ten sensibly-priced companies that possess important long-term competitive advantages, conventional diversification makes no sense for you.” (1993)
Buffett is renowned for his discipline of staying with his circle of competence. He avoids businesses he does not understand and industries where change is rapid. This is not because Buffett lacks capability, but because he values clarity and predictability. That humility, paired with deep understanding, creates conviction.
I take a similar approach. I prefer businesses in stable industries with straightforward models and consistent economics. These are the types of companies where I can confidently forecast cash flows and identify risks. Complexity, on the other hand, erodes conviction, making it difficult to hold through uncertain times.
Buffett’s view on concentrated portfolios also resonated deeply. If I truly understand a business including its risks, its moat, its trajectory, I am more comfortable sizing the position accordingly. Diversification has its place, but for investors who have done the work, concentration in a few high-conviction ideas can lead to superior outcomes.
5. Have A Long-Term Perspective
“Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient.” (1991)
“In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” (1988)
Buffett’s long-term perspective is not simply about holding stocks. It’s about thinking like an owner. He doesn’t react to short-term market movements because his discipline allows him to have conviction in long-term business outcomes. That perspective is a major advantage in a world driven by short-term noise.
Similarly, volatility doesn’t shake my conviction when I understand what I own. The ability to hold through drawdowns, to trust your process during uncertainty, and to let compounding work uninterrupted over time is what creates wealth.
As a result, my portfolio consists of companies I’d feel comfortable holding for a decade, even if short-term news flow is disappointing. That mindset protects me from emotional decision-making.
‘Forever’ doesn’t mean blindly holding, but it is an owner’s mindset. It means defaulting to hold unless something fundamentally changes. That alone changes how an investor evaluates a business, reacts to earnings, and manages risk.
Final Thoughts
Rereading Buffett’s letters reminded me just how profoundly his thinking has shaped my investment approach. While I’ve studied many great investors over the years whom have also influenced my thinking—Terry Smith, Chuck Acre, Chris Hohn, Benjamin Graham—Buffett’s influence runs deeper than I had fully appreciated.
Looking back at my own investment philosophy, I can trace clear lines from his shareholder letters to my core beliefs: the emphasis on business quality over statistical cheapness, the focus on predictable companies within my circle of competence, the discipline of valuation and margin of safety. These principles he articulated so clearly have become the foundation of how I think about markets, evaluate businesses, and construct a portfolio built for compounding.
