QUALITY BUSINESSES

“I believe that the greatest long-range investment profits are never obtained by investing in marginal companies.” Phil Fisher 1958

"A great business at a fair price is superior to a fair business at a great price." Charlie Munger

“We’ve really made the money out of high quality businesses. In some cases, we bought the whole business. And in some cases, we just bought a big block of stock. But when you analyze what happened, the big money’s been made in the high quality businesses. And most of the other people who’ve made a lot of money have done so in high quality businesses.” Charlie Munger

“The risk of paying too high a price for good-quality stocks – while a real one – is not the chief hazard confronting the average buyer of securities. Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.” Benjamin Graham

“When it comes to generating good returns, the most important thing is quality.” Terry Smith

“We are looking at investing in very, very high-quality companies that have great franchises and that have had these great franchises for many years.” David Polen

"Generally speaking, I think if you’re sure enough about a business being wonderful, it’s more important to be certain about the business being a wonderful business than it is to be certain that the price is not 10% too high or 5% too high or something of the sort." Warren Buffett

"Once we 'd gotten over the hurdle of recognizing that a thing could be a bargain based on quantitative measures that would have horrified Graham, we started thinking about better businesses. And, by the way, the bulk of the billions in Berkshire Hathaway has come from the better businesses. Much of the first $200 or $300 million came from scrambling around with our Geiger counter. But the great bulk of the money has come from the great businesses." Charlie Munger

"Our goal is to find outstanding businesses at sensible prices, not a mediocre business at a bargain price." Warren Buffett

“If you’re moving to Florida, would you call a realtor and say get, you know, give me the cheapest neighborhood? [No, of course not]. Why do we do that in stocks?” Rajiv Jain

"See's Candy - it was acquired at a premium over book [value] and it worked. Hochschild, Kohn, the department store chain was bought at a discount from book and liquidating value. It didn't work. Those two things together helped shift our thinking to the idea of paying higher prices for better businesses." Charlie Munger

"Charlie made me focus on the merits of a great business with tremendously growing earnings power - but only when you can be sure of it - not like Texas Instruments or Polaroid, where the earnings power was hypothetical." Warren Buffett

“I much prefer to be long a good business, so we focus on buying growth at a reasonable price.” Larry Robbins

"Our interest starts first with the quality of the business." Jeffrey Ubben

"Quality very much describes what we do. We think about two things, quality and price, but we think about quality way before we think about price. We are trying to buy outstanding businesses run by outstanding managers." Chris Bloomstran

“Quality counts. If you are a long term investor, it’s hard to find a more important factor as to what will power your ultimate investment returns. That said, quality is impossible to measure with precision because it often embodies more subjective qualitative factors than easily quantifiable measurements. Quality is also dynamic and changes over time.” Tom Gayner

“While the growth aspect of an investment case invariably focuses on opportunity, the elements that define quality depend more heavily on ability and execution. We ask: What is a company’s competitive advantage and why will it endure? How resilient is its operating and financial model to unexpected disruptions, whether internal or external? Is there something special about the management or ownership of the company that makes it more likely success will be sustained? Only by addressing these questions and gaining insight on these qualitative inputs can we hope to understand whether the quantitative outputs of a business are likely to endure or improve over our expected holding period.” Tom Walsh, Ballie Gifford

“Quality is under appreciated. It cannot be modelled in Excel, it’s not on the balance sheet, nor does it make for an exciting investment pitch. Quality is not easy to pin down, because it often represents new ways of doing things that stretch or break old mental models.” Josh Tarasoff

“I just like the great businesses.” Charlie Munger

“When we think about companies, the over-riding analytical consideration is the quality of the business and quality of management’s capital allocation decisions. The longer investors own shares the more their outcome is linked to these two metrics.” Nick Sleep

“A great company keeps working when you’re not. A great company will eventually earn more and more and more while you’re just sitting and doing nothing. And a mediocre company won’t do that. So you’re harnessing a long range force that will help you. It’s very important. These mediocre companies, they by and large are going to cause a lot of agony and very modest profits. If you do fine, you’ve got to sell it and find another one. It’s a lot of work. Whereas you just buy one great company, and if you get the right thing at the right price, you just sit there.” Charlie Munger

“Price is the last thing we look at because we don’t want to make a mistake in the business quality or the management quality. Because that is going to be the determinant of your success. If you think back to Coca-Cola trading at 45 times earnings or whatever in the 1960s, had you paid that 45x and just held onto it, your return would gravitate towards the ROE of the business the longer you held it. So over four decades you’d probably still be compounding in the high teens or low 20%s. So if we’re going to make a mistake, I want to make a mistake on the price. I don’t want to make a mistake on the quality.” Brian Bares

“A full price is often justified for high quality, ‘under-the-radar’ businesses".” Marathon Asset Management

"I would say that if it’s a really wonderful business, we probably come up with higher intrinsic values than most people do." Warren Buffett

“Other investors persistently under-estimate quality, resulting in unduly low market valuations for the very best companies. This is the core proposition of Lindsell Train’s investment approach and one that provides us with an enduring market inefficiency to exploit.” Nick Train

“Investors know that in time average companies fail, and so stocks are discounted for that risk. However, the discount is applied to all stocks, even those that, in the end do not fail. The shares of great companies can therefore be cheap, in some cases, for decades.” Nick Sleep

“We do believe truly exceptional businesses that have established their market-leading positions through competitive advantage can continue to compound those advantages over time more than people expect. We call that mean aversion.” Stephen Arnold

“When you find a truly wonderful business, stick with it. Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable.” Warren Buffett

“Whilst precise prices might elude us, it seems clear that genuinely long-duration high-growth stocks both exist and are worth considerably more than reckonable via traditional techniques.” James Bullock

“To me it appears that exceptional companies with durable competitive advantages are in fact cheap almost all the time. The point is such companies are rare. It is plain wrong to expect them to be valued similarly to what is the vast majority of ephemeral, low value-added businesses.” Nick Train

“We have observed a persistence to this anomaly - the best businesses, now as in the past simply do not trade at prices representative of their ability to continually generate high returns over long periods of time.” James Bullock

“Investors rarely appropriately value truly great companies.” Nick Sleep

“We’re not just looking for bargains—we are looking for great companies. When you set the hurdles as high as we do, you will rarely find a company that feels extremely cheap. At Polen Capital, we try to find great companies that we believe will compound for a very long time and where the valuation is not fully reflecting that potential. People’s time horizons tend to be quite short in the investing world, and we feel it is not hard to find great businesses at attractive prices.” Dan Davidowitz

"Looking back, when we’ve bought wonderful businesses that turned out to continue to be wonderful, we could’ve paid significantly more money, and they still would have been great business decisions. But you never know 100 percent for sure. And so it isn’t as precise as you might think. Generally speaking, if you get a chance to buy a wonderful business — and by that, I would mean one that has economic characteristics that lead you to believe, with a high degree of certainty, that they will be earning unusual returns on capital over time — unusually high — and, better yet, if they get the chance to employ more capital at — again, at high rates of return — that’s the best of all businesses. And you probably should stretch a little." Warren Buffett

“Buy the best companies. And we're willing to pay up for them." Roger Engemann

“We think it is extremely hard to find exceptional companies. Most companies aren't exceptional. So whatever your strategy is, it has to be designed to distinguish between what is exceptional and what isn't exceptional.” Reece Duca

“If you are a long-term investor, buying shares in a good business is more important than valuation. If you are not a long-term investor, what are you doing investing in the stock market?” Terry Smith”

“It’s been born out of experience the number of times, in a long-hold private equity business, that the entry price is far less important than the goodness of the asset that you’ve bought. It’s very easy to look back and say ‘wow’ an extra ten percent or whatever wouldn’t have mattered if you found the right company.” Berkshire Partners

"When you find a really good business run by first class people, chances are a price that looks high isn't high. The combination is rare enough, it's worth a pretty good price." Warren Buffett

"One characteristic that makes owning a high quality company so attractive is the growth that comes from reinvesting cash flows at high rates of return. Clearly compounding is a powerful force and is often the reason a stretched valuation can be made palatable." Marathon Asset Management

"I look for good businesses. A good business is one that provides a necessary service or products and has a balance sheet and cash flow that can sustain it through difficult periods.” Kevin Daly

“You have to focus first and foremost on high-quality businesses that can’t blow up and should grow in value over time.” Bill Ackman

“At Tiger Global, we seek to buy high-quality companies at attractive multiples of future free cash flow run by talented, shareholder-oriented management teams.” Chase Coleman

“Our strategy is to own high quality, modestly valued business over many years, to take advantage of the power of compounding as earnings grow. To do that successfully only works if we avoid mistakes – unforced errors – that interrupt the power of compounding.” Ira Rothberg

“Quality matters, in businesses and in people. Better-quality businesses are more likely to grow and compound cash flow; low-quality businesses often erode and even superior managers, who are difficult to identify, attract, and retain, may not be enough to save them.” Seth Klarman

“We’re committed to owning high-quality businesses in industries we understand and can underwrite.” Adam Weiss

"I think you ignore business quality and management integrity to your peril when allocating capital." Robert Vinall

"Why would anyone want to own a mediocre company just because it's cheap, when you can own and live with great companies?" T Rowe Price

“We have become more quality focused in our choice of companies to invest in. When I started investing we’d look at anything - a bank, a miner, a steel company - all sorts of things. Over the years I realised there’s good companies and bad companies and I became more discerning about what was good and what was bad. I realised good is better. We’ve become much more quality conscious, focused on quality compounding. [We’ve become] less of an activist because good companies generally tend to be well run as well. We do less activism and let the quality of the companies do the work.” Chris Hohn

"I started out looking for cheap securities... Over time, I really fell in love with strong businesses. I morphed into finding strong businesses at bargain prices. I still have a streak in me that favours finding really cheap securities - I just can't help it. But over time, I've become more attracted to looking for great businesses that are inherently superior, more competitive, easier to predict, and with strong management teams." Li Lu

“One lesson that has been very slow for me to learn but I get more and more appreciation for is it’s far better to buy a good business at a fair price than a fair business at a good price. I started life as a bargain hunter and I'm still a bargain hunter and I've learned to appreciate that. The transition I've made is I don't want to buy pure bargains that much anymore. I'm more interested in moats that are at bargain prices, but it's probably another level of evolution to be able to buy moats which don't appear to be cheap but may in the end be wonderful. If I was talking to my younger self that's what I would tell him is to look for the great businesses. The Holy Grail from my perspective is that because there are 50,000 stocks, the market does give you every so often great moats at great prices.” Mohnish Pabrai

"My initial emphasis was just on valuation. The cheaper, the better. There were of course other parts to the analysts, of course, but the energy went to finding discounted companies. The bigger the discount, the more interesting, and that's the work you focused on. As I evolved, I began to feel that it was even more important to focus on business quality, specifically value stability.” C.T Fitzpatrick

"Our portfolios have shifted towards higher quality companies with sustainable barriers to entry." Marathon Asset Management

"Whereas we once might have been more willing to buy mediocre businesses at unbelievable prices, we are committed to buying good businesses at great prices and great businesses at good prices." Steven Romick

“I definitely have a transitioned towards the great businesses… My empirical observation at the core of my philosophy is that the best investments in the stock market will come from the best businesses over time.” John Huber

“What we learned is that if you buy a good and sustainable business, then over time the return of that business will do the natural compounding for you.” William Browne

“Our preference is for high quality businesses that are easily understood. This alone eliminates the majority of investment alternatives, allowing us to focus our resources on understanding simple businesses without distraction from the noise outside of our circle.” Chris Parvese

“Our philosophy is to follow Charlie Munger’s advice and buy great companies at fair prices (instead of a fair company at a great price) and then allow our portfolio value to compound along with their earnings.” Shad Rowe

“Our resulting style in the partnership is to try and find outstanding businesses, to understand their true value, and when the price is reasonable, purchase shares.” Chuck Akre

“Our approach is simple. Great businesses not only survive but also thrive during crises.” IP Capital Partners

“Quality provides two things: a much lower probability of business extinction and the ability to compound capital.” Jerry Hakala

“The practice of not losing money is significantly advanced by the selection of superior businesses, because their royalty keeps on working in spite of general business conditions and isolated poor managerial decisions.” Chuck Akre

“This isn’t unique to us, but we want companies with large amounts of free cash flow, good business dynamics, a proven ability to profitably reinvest that cash flow and management properly incentivized to do the right thing for shareholders. We generally focus on businesses that are “two-cycle tested,” where they’ve been through a couple recessions and have survived intact.” Leon Cooperman

"We don't want any lousy businesses. We used to make money buying them and wringing money out, but it is painful, especially when you're rich. Sometimes it happens by accident, and then it is like dealing with your relatives and you hope to get rid of them but can't really." Charlie Munger

“If you’re in a lousy business for a long time, you’re going to get a lousy result even if you buy it cheap.” Warren Buffett

“Ben Graham had blind spots. He had too low an appreciation of the fact that some businesses were worth paying big premiums for.” Charlie Munger

"I tend to avoid the shares of weaker companies, even if their shares are selling at depressed prices. I strongly prefer purchasing undervalued shares of strong and well-positioned companies." Ed Wachenheim

"With respect to quality businesses, the key aspects are unit economics, returns on capital, appropriate leverage, free-cash conversion, market share, margin resiliency, moat, long-term growth potential, and management. The motivation for focusing on these types of businesses is that they blow up less frequently, and even if they do blow up, they do so with less severity. High-quality businesses also provide natural tailwinds to returns by virtue of their economics, and their resiliency enables portfolio concentration, which is valuable because it affords the opportunity to perform deep primary research." Adam Weiss

“What makes a good business model? It primarily rests on structural competitive advantages, those inherent features that prevent rivals from entering a company’s business and/or competing effectively with it. Common examples would be natural monopolies or oligopolies, razor/ razorblade businesses, enduring brands, network effects, high switching costs and economies of scale. Perfect business models don’t exist, but many come close to varying degrees.” Frank Martin

"If a business requires a superstar to produce great results, the business itself cannot be deemed great. A medical partnership led by your area’s premier brain surgeon may enjoy outsized and growing earnings, but that tells little about its future. The partnership’s moat will go when the surgeon goes. You can count, though, on the moat of the Mayo Clinic to endure, even though you can’t name its CEO." Warren Buffett

"People don't believe business quality is a hedge, but if your valuation discipline holds and you get the quality of the business right, you can take a 50 year flood, which is what 2008 was, and live to take advantage of it." Jeffrey Ubben

“We want to own terrific business for years – hopefully many years. We look for sustainable competitive advantages; moats; high return of cash flow as a percent of invested capital; profitability machines. Then we assess if such competitive advantages can be sustainable for the foreseeable future. We look of course for skin-in-the-game & competent managements. If you are wrong, better businesses typically don’t crash as bad as bad businesses (assuming you didn’t pay a ransom valuation for the stock).” David Rolfe

“I know of no better hedge against an uncertain world than owning a well-selected basket of common stocks in high quality businesses at deeply discounted prices (under normal circumstances) and ignoring the unknowable and the uncontrollable.” Li Lu

“All we do is really spend quality time with quality people building quality businesses. Quality by nature is just so defensive. What do we define as quality? By nature – they should have some inherent nature – where they actually behave really, really well in downturns.” Lei Zhang

“Any strategy based on compounding wealth requires capital preservation in down markets. It is our experience that quality companies with consistently solid, relatively non-cyclical, earnings growth, when purchased at discounts to our appraisal of fair value, tend to preserve capital in down markets.” Bill Stewart

"I looked back at the investments that had worked best for me over time and they were regularly in companies with superior business models. I concluded that the ultimate margin of safety was in the quality of the business and not the cheapness of the stock, so I re-orientated my process and decision-making around that." Jake Rosser

“The best long term margin of safety comes not from an investment’s price but from the value of a company’s sustained competitive advantage over very long periods of time. That’s what quality investing is all about.” Thomas Russo

“Owning only the best companies also allows us to protect on the downside. If you allow yourself to buy marginal or poor businesses, you introduce unnecessary risk into the portfolio. Our criteria aim to minimize that risk.” Daniel Davidowitz

"From our perspective, it's much safer to buy high quality business. It's Buffettesque. Buy those high quality businesses, give them time to work - five to seven years - they'll do well for you." Paul Black

"A really wonderful business is very well protected against the vicissitudes of the economy over time and the competition. I mean, we’re talking about businesses that are resistant to effective competition. And three of those will be better than 100 average businesses. And they’ll be safer, incidentally. There is less risk in owning three easy-to-identify, wonderful businesses than there is in owning 50 well-known, big businesses." Warren Buffett

"We think a rigorous discipline of buying quality companies, when priced right and run by honest, intelligent management teams, offers the best defence against challenging macro conditions" Allan Mecham

“Regardless of macroeconomic conditions, our strategy is to own exceptional companies at prices deeply discounted from value. We think this will likely work very well for all of our investors over the long term. Indeed, I believe such a strategy will probably work better if there is .a lot of turmoil.” Li Lu

"I’m most interested in owning good businesses, run by managers who don’t make big mistakes." Ed Wachencheim

“Over time, however, I found myself gravitating toward higher-quality businesses. [Our] firm only invests in high-quality businesses and, in fact, we have no interest in owning the vast majority of publicly traded companies at any price.” Chad Clark

“A base business cannot be transformed into a golden business by tricks of accounting or capital structure. The man claiming to be a financial alchemist may become rich. But gullible investors rather than business achievements will usually be the source of his wealth.” Warren Buffett

“Almost by definition, a really good business generates far more money (at least after its early years) than it can use internally.” Warren Buffett

"Business quality to us is the single most important criterion for determining what's interesting." Bill Ackman

“My goal as your portfolio manager is to populate our portfolio with companies possessing ‘winner DNA’ in great businesses of favourable industries and that we can purchase at a substantial discount to their intrinsic value.” Li Lu

“I am very interested in super high quality companies that have demonstrated success, have demonstrated earnings and high ROC and have some durable features that can give us high conviction” Chuck Royce

"The main thing is to find a wonderful business, like Phil Carret always did. He’s one of my heroes, and that’s an approach he’s used." Warren Buffett

"It is really trying to find high quality businesses where we have a lot of confidence in the business. If we make a mistake it is going to be that we mis-analysed the businesses - it was not as good as we thought." Glenn Greenberg

"Shares of quality companies run for the shareholders stand an excellent chance of providing above-average returns to investors over the long term." Lou Simpson

"The single-most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business. I’ve been in both, and I know the difference." Warren Buffett

"Over the long term, it's hard for a stock to earn a much better return than the business which underlies it. If the business earns 6% on capital over 40 years and you hold it for 40 years, you're not going to do make much different than a 6% return even if you buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result. So the trick is getting into better businesses." Charlie Munger

"Bear in mind- this is a critical fact often ignored - that investors as a whole cannot get anything out of their businesses except what the businesses earn." Warren Buffett

“Good is the enemy of great. We see many companies that are just fine ... founders are good, market seems good, product seems good, customers kinda like it, and they got a little revenue and it's all fine, but those companies tend to never go anywhere. Every once in a while we'll see these companies that have some extremely strong strength, some extremely special wonderful thing going on, that by the way may have all kinds of problems and issues, but there's something at the core of what it is that's really special and magical. And those are the ones that we want to do. We're trying to stock our portfolio with just investments like that." Marc Andreessen

"Ira Marshall said [in reference to See's Candy] you guys are crazy - there are some things you should pay up for, like quality businesses and people. You are underestimating quality. We listened to the criticism and changed out mind. This is a good lesson for anyone, the ability to take the criticism constructively and learn from it." Charlie Munger

"From 1932 to nearly the present, the studies confirm that when bad things happen to good companies, they recover - and usually quite nicely in a reasonable amount of time." Chris Browne 2007

"At the end of the day, in order to build wealth, there is a simple approach which we have followed for 17 years at Giverny Capital: investing for the long term in high-quality companies purchased at attractive valuations—investing in companies that will survive the crises of our civilization and the short-term irrationally of our economic system." Francois Rochon

"Generally speaking, it pays to stay away from declining businesses. They are very difficult to value. We have several declining businesses - the newspaper business is a declining business. We will pay a price to be in that business but that is not where we are going to make a lot of money. All the money at Berkshire is going to be made from investing in growing businesses. I would never spend a lot of time trying to value a declining business that I call a cigar butt (one last free puff out of the business). I can spend the same amount of energy and intelligence analysing a growing business and am going to get a better outcome. At Berkshire, we have some declining businesses. We started with declining businesses, textiles, US made shoes, Blue Chip Stamps - We have one business that did $120 million in sales in 1968 and last year did about $20,000 in sales. We'd like to bring the sales chart out and put it upside down." Warren Buffett

“It is hard to make a good return over the long term by investing in poor-quality or even average businesses.” Terry Smith

“On my time horizon, the calibre of a company is much more important than its value. You can be wrong about value in the short term, but still have a great investment over time. My worst errors have come from overestimating a company's business model, not overestimating the worth of a fine company.” Nick Train

"We buy good companies that we know will endure, that generate free cash usually in and out of recession." Chris Mittleman

"When we talk about business quality, we’re looking through our fundamental research to assess the company’s ability to protect and grow intrinsic value. If the dollar of assets you buy is increasing in value at an above-average rate, that’s an opportunity to generate alpha." Ricky Sandler

"Our definition of quality is value stability. How stable is your value? Things that lend themselves to value stability are production of free cash flow, stable margins, and strong balance sheets." C.T Fitzpatrick

“It is easy to vacation or enjoy family if one owns great businesses — and it’s impossible if one is tracking a flock of trading positions about which one has little conviction.” Glenn Greenberg 

"Charlie and I are simply not smart enough to get great results by adroitly buying and selling portions of far-from-great businesses." Warren Buffett

"As students of the world’s best companies we prepare our shopping list well in advance. When volatility strikes, we can act quickly having already spent years (in many cases) researching the companies we purchase. As French Micro-biologist Louis Pasteur once said, ‘chance favours the prepared mind.’” Jake Rosser

“We specialise in high-quality businesses. We define quality as the ability of a business to sustain a high-unleveraged return on its capital. We concentrate on businesses with clear opportunities to grow indefinitely while generating high returns on the capital required for growth. We prefer businesses that would make a high return on their shareholders’ equity, even if they were debt free.” Andy Brown

“Buy good businesses. The single most important indicator of a good business is its return on capital. We believe that in almost every case in which a company earns a superior return on capital over a long period of time it is because it enjoys a unique proprietary position in its industry and/or has outstanding management. The ability to earn a high return on capital means that the earnings which are not paid out as dividends but rather retained in the business are likely to be re-invested at a high rate of return to provide for good future earnings and equity growth.” Bill Ruane

“My firm’s approach is to seek out good quality businesses at a reasonable price. We assess quality in terms of such attributes as a business’s return on capital, the defensibility of its market position, its pricing power, the caliber of management, and its growth potential.” Steve Romick

"Is it a great business? That’s the key question. Is it earning high returns on capital and command high margins? Does it have a good history of growing its intrinsic value and rewarding shareholders? Warren Buffett has this great phrase: ‘If a company has a lousy past and a great future, we’ll miss it.’ It’s the same thing here." Francois Rochon

"I would prefer a great business, great manager, one that is able to use all the capital they generate and can keep doing that. Behind that will be a great business, great managers that can use the capital; and then great business, not such great manager, and then we just go down the line. Not such a great business, not such a great manager, but still out to achieve and we will probably still make out. We have made investments in all of those and I learned over time that I am better off being more on the top than at the bottom end." Mohnish Pabrai

"Charlie’s most important architectural feat was the design of today’s Berkshire. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices." Warren Buffett

"By owning great companies, you can just forget about all the noise and the irrational market fluctuations. And slowly get rich." Francois Rochon

"We look for very high quality businesses, what we'd describe as simple, predictable, free-cashflow generative dominant businesses. A business Warren Buffett would describe as having a moat around it." Bill Ackman

“Our approach to all our portfolios is the same: to identify and invest in high-quality businesses.” Rajiv Jain

“As markets have changed, I have realized that while event‐driven is still an essential investment lens, today, quality is also an essential screen.” Dan Loeb

“The first thing we decide is whether it’s a good business. And if it’s not, we just drop it.” Glenn Greenberg

"The requirements for a great business for us have three components. The first is, we spend a lot of time trying to understand what is causing the above average return to occur. Is it getting better or worse? The second thing we look for are the people who run the business. Not only do we want to have great business managers but we want see they treat public shareholders as partners even as though don't know them. Lastly, we look to see if there is a great history of reinvestment of the free cash-flow as well as a significant opportunity to reinvest free cash-flow and earn above average rates of return. None of those things ever behave in a constant fashion. Business models get better or worse. Peoples behaviour sometimes change modestly. The ability to reinvest or the results from re-investment vary from time to time. We make a judgement about which are real keepers." Chuck Akre

"Characteristics of a good business include businesses that provide a demonstrable convenience to customers or a high value-added product or service, businesses capable of withstanding industry turmoil or a period of mismanagement, slowly evolving businesses with simple business models, businesses with recurring revenue streams and no need to continually recreate demand and/or replace customers, businesses with a minimum of uncontrollable factors affecting their results, businesses that do not have a concentrated customer base, and businesses that generate surplus cash flow after funding their growth." Jeffrey Ubben

"The idea is not just to find cheap businesses, but to find good businesses! I learned that a cheap business can kill you, but a good business won't. I remember investing in a Spanish textile company that was selling below net cash. The stock was cheap, but the business was so lousy that the management team not only failed to keep it operating, but also lost all of its cash and assets. So sustainability and quality matter!" Francisco Garcia Parames

"Inferior quality generally produces inferior economics." Warren Buffett

"My investment mistakes are too numerous to list here. I noticed a few years ago that two common threads ran through all my investing mistakes. The first was that I was buying inferior businesses due to what I perceived at the time to be a low multiple (but alas not a low valuation). The second was that I was buying inferior businesses due to the prospect of a fast buck or what analysts term a catalyst." Robert Vinall

“Our focus on business quality has largely enabled us to avoid investments in businesses which make products or deliver services which we do not believe to be desirable, which treat their employees poorly, and/or which have long-term financial and legal risks that are a consequence of their negative externalities. We believe that this approach has helped us to avoid losses and generate profits by identifying great businesses that have contributed to our long-term investment returns, and by avoiding others which would likely have generated losses in the portfolio.” Bill Ackman

"Buying Berkshire Hathaway itself was a mistake because Berkshire was a lousy textile business and I bought it very cheap. I'd been taught by Ben Graham to buy things on a quantitative basis and look around for things that are cheap. I was taught that in 1949-50 and it made a big impression on me. So I went around looking for what I call used cigar butts of stocks. You find on the street this terrible looking soggy cigar butt with one puff left in it, disgusting but it's free, it's cheap. Then you look for the next one. That's what I did for years. It's a mistake. Although you make money doing it you can't make it with big money. It's so much easier buying wonderful businesses. Now I'd rather buy a wonderful business at a fair price that a fair business at a wonderful price. Berkshire was selling below it's working capital per share, you got plants for nothing, you got machinery for nothing, you got the inventory and receivables at a discount. It was cheap, so I bought it and twenty years later I was still running a lousy business and that money did not compound. Time is the friend of the wonderful business, you keep compounding. Time is the enemy of the lousy business. Staying with those businesses is a mistake." Warren Buffett

“Time is on your side when you own shares of superior companies.” Peter Lynch

“Quality is the foundation of our portfolio. To us, quality is defined by one question: is time your friend? Quality is a protective moat that allows companies to grow and thrive through unpredictable economic cycles.” Lei Zhang

“Time is the enemy of the poor business, and it’s the friend of the great business. I mean if you have a business that’s earning 20 or 25 percent on equity, and it does that for a long time, time is your friend.” Warren Buffett

“A good company is one that regularly makes a high return in cash terms on capital employed, and can reinvest at least part of that cash flow in order to grow its business and compound the value of your investment. Bad companies do not do this. They make inadequate returns on the capital they employ. You may think you should invest in these poor companies as they are going to improve because the management will change, or they will be taken over, or their results will pick up with the economic or business cycle. But each day you wait for such events, these companies destroy a little bit more value. Good companies do the opposite. With a good company, time is on your side.” Terry Smith

"It must be noted that your Chairman, always a quick study, required only 20 years to recognize how important it was to buy
good businesses. In the interim, I searched for ‘bargains’ - and had the misfortune to find some. My punishment was an education in the economics of short-line farm implement manufacturers, third-place department stores, and New England textile
manufacturers." Warren Buffett 1987

“I have a bias towards quality businesses, especially family-owned. Many of our value competitors start the process of identifying likely investments by starting with price. Looking at a screen. We don’t believe in those screens. Cheap looking stocks will end up on screens. They will be either the lousiest competitors in an industry or operating in industries which are overly competitive. What makes us want to investigate a stock idea - it’s not that it looks cheap - but if there seems to be something unique or superior about it. It may not optically look cheap.” Charles De Vaulx

"The ability to raise prices – the ability to differentiate yourself in a real way, and a real way means you can charge a different price – that makes a great business." Warren Buffett

“We aim to achieve superior returns by being long-term owners of high-quality companies with substantial “economic moats”, great growth potential, and run by trust-worthy people.” Li Lu

“An illiquid and low-quality company, I believe, has a much smaller pool of buyers ready to step in than a high-quality one. So, when we think about portfolio construction, we view quality from multiple dimensions, from fundamentals to liquidity and any associated discount.” Rajiv Jain

“More recently, our equity investment framework has drawn us to larger market capitalizations and we have learned to ‘pay up’ for certain higher-quality companies with market-dominating positions.” Dan Loeb

"Great businesses are rare and so are the opportunities to purchase them advantageously. We attempt to deserve what we want by keeping this firmly front-of-mind." Chuck Akre

“We aim to invest in high quality businesses. This may sound blindingly obvious, but you might be surprised how many investors either don’t do this or do not have a good definition of a high quality business. In our view, a high quality business is one which can sustain a high return on operating capital employed.” Terry Smith

"Put simply, we can only expect quality to outperform, firstly, if 'quality' incorporates characteristics that should lead, if sustained, to superior long-term compounding of intrinsic value, and, secondly, if this superiority is not already captured in valuation." Marathon Asset Management

“Quality is forward looking. Today everyone talks about buying quality at sensible prices, but you have to be sure you’re not overly anchored to backward-looking quality.” Rajiv Jain

“Presently, all our top holdings are powerful companies, often the undisputed leaders in their industry. They all have long histories of successes. They have enjoyed many years of growth through good and bad times and in all likelihood will continue to grow for many more years to come.” Li Lu 2013

“In actuality, all the companies that we have invested in over the years are leaders in their particular industries, certainly on a domestic basis and most even on an international basis.” David Polen

“We believe investing only in the highest-quality businesses minimizes both the frequency and severity of disappointing outcomes, which goes a long way toward delivering better-than-average performance.” Stephen Arnold

“It’s obvious to us that you can’t execute an investment philosophy unless you’re a true believer in it. There’s not a shred of doubt in any of our minds that owning great businesses run by great people with great reinvestment opportunities and acumen is the right way to invest.” John Neff, Akre

“Owning great companies, and not trying to predict the stock market is the key to beating the index over the long run." Francois Rochon

“As always, I try to remember that through every type of economic environment in my lifetime, the right answer has been to own great companies, hopefully ones with pricing power, and tolerate volatility.” David Poppe

“While our process was geared toward strong business models we found we were too often tempted by a low price, thinking we could make money with what Peter Lynch called “crappy companies on the way to semi-crappy companies.” We subsequently realized that melting ice cube businesses were unsafe at any price. This sounds obvious in hindsight, but as a value investor it was a difficult pivot to make. We had little competition for some of the businesses we were buying and there was a real analytical edge in assessing whether a price misappraisal was caused by an excisable issue. There is money to be made in these hunting grounds, but everyone needs to decide what strategies they want to play. For us, we realized we were better at teasing out the return potential of superior business models than running a valuation Geiger counter over everything. We also found it was much more fulfilling to get behind companies we believed in rather than waiting for the market to rerate our holdings.” Jake Rosser

“Long-term wealth creation is about investing in great businesses with great people and compounding over the long term. So, despite wars, pandemics, explosions, recessions, and all the other things you just mentioned, over the past 30 years, we’ve just continued to buy great businesses, keep compounding and the returns have been excellent. And so, I guess I’d just say everyone just has to stay invested, not get too excited about the market gyrations that happen every day, and just keep with it. And that’s the secret to success in investing.” Bruce Flatt, CEO Brookfield Asset Management

“Because investors cannot count on their ability to accurately predict recessions, we believe the best course of action for equity investors is to own high-quality companies that are protected by strong competitive advantages, have very capable management teams, and are prudent in their risk taking such that there is never any question that they can make it through recessions when they inevitable arrive. While predicting when the next recession will occur is extremely difficult, it is a foregone conclusion that a recession will arrive at some point.” Ensemble Capital

“A quality growth investment is defined far more by its inputs than it is by the financial outputs that anyone with a Bloomberg terminal can screen for. Identifying inputs is where in-depth fundamental research adds greatest value.” Tom Walsh, Baillie Gifford

“In my experience, the surprises in great companies tend to be to the upside.” Robert Vinall

“Charlie, in 1965, promptly advised me: ‘Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.’ With much back-sliding I subsequently followed his instructions.” Warren Buffett

Further Reading:
‘SOYA - Sit on Your Ass,’ Investment Masters Class, 2020.
‘When to Sell a Great Company,’ Investment Masters Class. 2017.
‘Quality Companies, Compounders and Value Traps,’ Investment Masters Class. 2016.
‘What is Quality - To Pay or Not to Pay?,’ - Terry Smith, Fundsmith.
‘Quality Delivers,’ Tom Walsh, Ballie Gifford, 2020.
‘Fish where the fish are: The philosophy of quality,’ IP Capital Partners, 2021.