Buffett's four-part investment screen: a business he understands, with favourable economics, honest and competent management, and a sensible price.
Deeper Explanation
Buffett has described his investment process as four sequential filters. First: Is this within my circle of competence — do I genuinely understand how this business earns money? Second: Does the business have durable competitive advantages — an economic moat that protects its returns? Third: Is management honest, competent, and focused on owner interests — not empire-builders or promoters? Fourth: Is the price sensible — is there sufficient margin of safety given the quality of the business? All four must be satisfied. A wonderful business at the wrong price is still a bad investment.
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