When coming to buying Stocks, Warren Buffett always had 4 aspects of what he will buy:
- One that we can understand
- With favorable long-term prospects
- Operated by honest and competent people
- Available at a very attractive price.
Mr. Buffett always teach us when Investing we are to stay in our "Circle of Competency". In his annual report Warren Buffett said: "You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital."
Warren Buffett does not use beta, efficient markets, modern portfolio theory, option pricing or emerging markets when investing. He always looks for the 4 aspects and purchases at a rational price whose earnings are virtually certain to be materially higher five, ten and twenty years from now.
Warren Buffett bought Coca-Cola Company and Gillette, two examples of the 4 aspects he wanted during he purchase. Warren Buffett had taught us what we should do when investing and he is a living example.
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