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The Quality Value Strategy buys companies with consistently high return on equity (ROE) at reasonable prices and holds them for the long run. It puts business quality ahead of a low price, unlike classic value investing, and turns Warren Buffett's published principles into rules.
Born in 1930 in Omaha, Nebraska. At 19 he read Graham's The Intelligent Investor, went to Columbia Business School to take his class, and worked at Graham-Newman for two years from 1954.
In 1956 he returned to Omaha and started an investment partnership, and in 1965 he took control of the textile company Berkshire Hathaway and turned it into a holding company. At first he bought merely cheap companies as his teacher did, but under the influence of his partner Charlie Munger and of Philip Fisher, he came to believe it is better to buy a wonderful company at a fair price than a fair company at a wonderful price.
The 1972 purchase of See's Candies is often cited as the turning point. He paid more than three times book value, which fails Graham's test, but the brand let the company raise prices, and over the following decades it produced many times the purchase price in cash.
His annual shareholder letters are read like textbooks, and he has pledged to give away most of his fortune. At the May 2025 annual meeting he said he would step down as CEO at the end of that year, with Greg Abel as his successor.
High margins attract competitors. Companies that keep high margins for years anyway have defenses such as brands, switching costs, network effects or cost advantages. In the financial statements, they show up as consistently high ROE and operating margins.
Stick to businesses you understand. Pass on businesses you cannot understand, however promising they look. That is why he avoided the losses of the late 1990s technology stocks even though he was criticized for not owning them.
A company that keeps its ROE at 20% reinvests its earnings and compounds on its own. He said that if you are not willing to own a stock for ten years, you should not own it for ten minutes.
A company that earns at least 15 on every 100 of shareholders' money each year, consistently over several years, not just one.
Companies whose customers stay when prices go up have high margins. Thin-margin companies lose their profits easily in downturns or price wars.
Good businesses run well without debt. If a high ROE comes from heavy debt, it is a risk, not a moat.
Some companies report profits but never build up cash. Check that free cash flow, the cash left after capital spending, is actually positive.
Even a wonderful company is not a good investment at too high a price, though he does not demand Graham-level bargains. This site allows a P/E of up to 25x.
This strategy model was independently built by Confluence Zone to quantify the investment philosophy in the works above. It is not an official model created, endorsed or reviewed by Warren Buffett or any related institution. Last reviewed: 2026-09-29
Related terms: ROE · Operating Margin · Debt-to-Equity Ratio
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