Operating profit over net profit: According to Buffett, operating profit – profits earned purely from core operations of the company – is a better gauge of the company’s financial health. Buffett says while net profit is reported more as a mandatory accounting practice, and is even widely transmitted, Berkshire Hathaway is more comfortable with operating profit. Operating profit excludes revenues from non-operating activities like sale of assets, investment and dividend earnings, gain from foreign exchange, etc. Invest in businesses that enjoy good economics: Buffett has been a proponent of long-term investment, and he believes in investing in companies which enjoy good economics that are fundamental and enduring. “We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring.

Source: Indian Express March 04, 2024 01:51 UTC