Our Favorite Holding Period is Forever: Buffett's Timeless Investment Philosophy

By sagebytes — 01 Apr 2025

From the 1988 Berkshire Hathaway Shareholder Letter

Core Investment Philosophy

Focus on intrinsic business value - Book value is just a starting point; what matters is what the constituent businesses are actually worth.
Long-term perspective - "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."
Ignore market fluctuations - "We have no opinion about where the stock market, interest rates, or business activity will be a year from now."

Exceptional economics - Seek businesses that earn good returns on equity while employing little or no debt
Consistent earning power - Historical performance matters; future projections and turnarounds are of little interest
Outstanding management - Partner with people you "like, admire, and trust" who think like owners
Simple businesses - "If there's lots of technology, we won't understand it"
Reasonable price - Pay a fair price; never overpay regardless of quality

Concentrate investments - "We continue to concentrate our investments in a very few companies that we try to understand well"
Diversify appropriately - "Too much of a good thing can be wonderful"
Avoid long-term bonds - Unless you're enthused about long-term stability in purchasing power of money
Think like business owners - Evaluate investments as if buying the entire business
Be cautious when others are greedy - "The less the prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs"

Reject Efficient Market Theory - Markets are frequently efficient but not always efficient
Analyze intelligently - Superior profits come from "carefully evaluating facts and continuously exercising discipline"
Seek margin of safety - The cornerstone of Graham's investment philosophy
Be patient - You don't need to swing at every pitch; wait for the right opportunity

Independent thinking - "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful"
Rational temperament - Emotional stability is vital for long-term success
Continuous learning - Study businesses, industries, and financial principles
Intellectual honesty - Be willing to acknowledge mistakes and change your mind when facts change

"In the short run, the market is a voting machine but in the long run, it is a weighing machine." - Benjamin Graham