Warren Buffett Used These 4 Simple Rules to Acquire 76 Businesses Worth Over $173 Billion
Buffett's insistence on understanding a business stems from his belief that clarity is essential for sound decision-making. He has often avoided industries or companies that are too complex or outside his circle of competence, preferring instead to focus on sectors where he can confidently assess risks and opportunities. This principle has helped Berkshire Hathaway avoid many speculative bubbles and costly missteps that have ensnared others.
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The second criterion, favorable long-term prospects, reflects Buffett's preference for businesses with durable competitive advantages — what he and his late, longtime business partner Charlie Munger called 'economic moats.' These are companies with strong brands, loyal customers, and high barriers to entry, enabling them to generate consistent profits over time. By focusing on long-term sustainability rather than short-term gains, Buffett has built a portfolio that can weather market volatility and changing economic cycles.
Buffett's third requirement — honest and competent management — shows his respect for integrity and skill in leadership. He has repeatedly credited the success of Berkshire Hathaway's investments to the quality of the people running its subsidiaries. Buffett's willingness to invest in companies where he is not directly involved in daily operations is rooted in his confidence in the character and capability of their management teams.
Finally, the demand for an attractive price is a hallmark of Buffett's value investing philosophy. He seeks to buy shares when they are undervalued relative to their intrinsic worth, providing a margin of safety against unforeseen risks. This discipline has allowed Berkshire Hathaway to achieve strong returns over decades, even as market conditions shift.
$173 Billion in Acquisitions
This philosophy has helped Buffett acquire an unreal number of businesses over the years. Berkshire Hathaway has completed over 72 major acquisitions and several more minor acquisitions over the years. With Buffett at the helm, Berkshire has expended over $173 billion in capital acquiring these businesses, ultimately creating over a trillion dollars in value for shareholders. While not all of Buffett's acquisitions have been successful, very few other investors even come close to his track record.
While few investors will ever acquire a business outright, many will invest in businesses via the stock market, and can use this methodology when looking to acquire companies in their equity portfolios. Buffett's 1977 letter and its guiding principles continue to influence investors, fund managers, and corporate leaders. As markets evolve with new technologies and global challenges, his focus on simplicity, quality, and value remains a steady compass. The enduring relevance of these criteria is evident in the continued success of Berkshire Hathaway and the widespread adoption of Buffett's methods by investors seeking long-term, sustainable growth.
In an era where complexity and speculation often dominate investing headlines, Buffett's timeless approach serves as a reminder that the fundamentals—integrity, prospects, and price—are as important now as they were nearly half a century ago.
On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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