Warren Buffett’s Investment Tenets

A concise checklist inspired by Buffett’s approach: analyze the business, the management, the financials and the market price before you invest.

Educational summary based on widely discussed Buffett principles. Not investment advice or a complete list. Always do your own research.

The Four Groups of Tenets

Business Tenets	Is the business simple and understandable? Does it have a consistent operating history? Does it have favourable long-term prospects?
Management Tenets	Is management rational in capital allocation? Is management candid with shareholders? Does management resist the institutional imperative?
Financial Tenets	Focus on return on equity (ROE), not only EPS. Calculate owner earnings (cash the business can distribute safely). Prefer companies with high profit margins and durable economics. For every dollar retained, at least one dollar of market value should be created.
Market Tenets	What is the intrinsic value of the business? Can the stock be purchased at a meaningful discount (margin of safety)?

Tip: Use this as a pre-investment filter. When in doubt, wait for clarity or better price.

How to apply these tenets (quick guide)

Rule of 72 Calculator Power of Compounding Beginners: Invest in Indices

Read 5–10 years of annual reports, translate accounting profits into owner earnings, compare ROE through cycles, estimate value conservatively, and insist on a margin of safety.

FAQ

What does “owner earnings” mean?

Owner earnings approximate cash that can be taken out of the business without hurting its competitive position: net income + non-cash charges − average maintenance capex.

What is the “institutional imperative”?

The tendency for managers to follow peers or legacy decisions rather than make rational, independent choices about capital allocation.

Why emphasize ROE over EPS?

EPS can be flattered by leverage or buybacks. Sustainable ROE shows how efficiently the company compounds shareholders’ equity over time.

How do I estimate intrinsic value with a margin of safety?

Use conservative cash-flow assumptions (DCF/owner earnings), cross-check with multiples, and buy only when price is meaningfully below your value range.