Warren Buffett once wrote: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

It’s something I’ve been thinking about a lot as I've got deeper and deeper into the world of investing - and learning more about Warren Buffet and his investments.

This simple shift in thinking completely transformed his approach. Instead of hunting for deeply undervalued but mediocre businesses (known as “cigar-butt” businesses by Buffet's mentor, Benjamin Graham), he began prioritising high quality companies and businesses with strong competitive edge and economic ‘moats' (things that gave the business a unique advantage).

A good example of this is Buffet’s investment into American Express which was suffering from a fraud scandal (some guy figured out how to fake how much soybean oil he had - long story). Buffet realised that it was still a good and trusted business but trading at a discount because of the scandal. And he bought big.

That lesson applies equally today: focusing first on quality, then on paying a sensible price that still offers an ‘out’ if the price goes to zero.

Neil

P.S. I’ve been working on a free guide called '16 Tips to Manage Money Better’ and I’d love to send you a copy. If you’d like one, reply to this email with the subject line ‘Tips’ and I’ll send it to you when it’s ready.