Principle 1: Do not try to forecast. Focus on what is knowable. Don’t try to make predictions about the market, the economy, the business cycle, long-term thematic trends or things that are unknowable.

Principle 2: Think and invest for the long-term. We cannot predict the performance of the market over three, twelve or even twenty-four months, however, over time a company’s share price should reflect the underlying value of the business. 

Principle 3: Competitive advantage. Look for businesses with a strong, sustainable competitive advantage. This could include brands, high switching costs, scale, sustainable cost advantages, network effects or access to scarce resource.

Principle 4: Invest in businesses with sustainably high returns on capital. These companies should generate free cash flow that is returned to shareholders, or is reinvested in the business at high expected rates of return. A dollar reinvested should result in at least a dollar of additional market value created.

Principle 5: Pay a fair price. Paying too high a price for even the best business can make a poor investment. Bargain prices don’t automatically make great investments either. Seek to pay a fair price for a great business.

Principle 6: Invest with honest, competent and capable management. Management should think like owners, be transparent and honest with investors, and always consider the return on shareholder capital.

Principle 7: Do your own homework. Do not rely on the research or opinions of others. Base decisions on real, first-hand information. Make sure you understand the risks.

Principle 8: Do not be contrarian for the sake of it. Look for unique insight, but don’t go against the crowd without a strong, well-researched view. The market is usually right.

Principle 9: Do not over diversify. Where we have high levels of confidence and acceptable levels of risk, we will invest in significant size. We will not invest a small amount in something where we are lukewarm on the idea.

Principle 10: Risk is not synonymous with volatility. We identify risk as the failure to meet our long-term investment objectives and the possible permanent loss of capital by selling during large, but temporary, market declines. Lower prices are an opportunity to acquire stakes in good businesses.

Principle 11: Do not use borrowed money to invest. Leverage can enhance returns but can become addictive and may reduce flexibility during market panics or crises.