A great company at a fair price usually beats a fair company at a great price.
Quality is worth a fair price.
Two companies, 15 years. You choose what to own. The other owns quality.
A cheap price on an average business stays average. A fair price on a great one keeps paying.
← Red LinesRed Line 34 of 48 The idea The numbers Where you see it Where it bends This game’s numbersHow strong the proof isBGood proof, with limits Where it comes from
A bargain with flat profits stays a bargain at best. A company whose profits keep growing can turn a fair price into a fine result.
€10,000 each for 20 years. The great company, bought at 25 times profit with profits growing 12% a year, ends near €58,000 even after its price falls to 15 times. The bargain at 10 times, profits flat, ends at €15,000.
Companies with loyal customers and pricing power keep raising profits for decades. Their shares rarely look cheap.
Any company is a bad buy at a crazy price.
Worked out on this page
Profitable, steady companies earned more than their price suggested in many countries and decades, but the extra return comes and goes.
- The Other Side of Value: The Gross Profitability Premium Robert Novy-Marx, Journal of Financial Economics 108(1), 1-28, 2013
- Quality Minus Junk Clifford S. Asness, Andrea Frazzini & Lasse Heje Pedersen, Review of Accounting Studies 24(1), 34-112, 2019
Checked 2 Nov 2026 · How we grade
- A Strong proof: Many good studies or long official data, from different teams or countries, point the same way.
- B Good proof, with limits: Solid studies agree on the direction, but the size varies, or the data covers few places or few kinds of people.
- C Mixed proof: Some good studies for, some against, or the evidence covers only part of the line.
- D Thin proof: Mostly one book’s argument, one survey or stories. It may be wise, but it has not been tested well.
- = True by the sums: It follows from arithmetic, so no study can overturn it. We still show what real data says.
Warren E. Buffett, Berkshire Hathaway shareholder letter (1989). In our words, not quoted.
See it in numbers: Moats · P/E (From Zero)
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