A Public Service Announcement for All Capital Allocators

By Jason Paul Rogers

I was just doing some morning reading when I stumbled onto this gem of a quote:

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” -Warren Buffett

I love this one; largely because it’s so contrary to how I was programmed to think.

Indeed, I was raised to “look for a bargain,” yet the more I’ve studied the investing greats over the years (i.e. Buffett, Zell, Munger, etc), the more I realize they each place an emphasis on allocating capital into quality, as opposed to buying “cheaply.”

Which makes sense to me, for this reason:

Great companies with loyal customers don’t typically collapse in tough markets; whereas mediocre companies without such a “moat” more often do.

So whether it’s real estate or a small/mid-sized business for sale, I believe in looking for “gems” rather than “cheap bargains” when analyzing acquisition targets.

Do you agree with this? Disagree? What’s your perspective?

-Jason 

PS – it’s worth noting that plenty of folks do make hearty returns buying bargains, and (usually) then flipping them. There’s definitely more than one path to Rome. My question is, which path is most sustainable, consistent, and durable?