Warren Buffett was heavily influenced by Benjamin Graham's principles of value investing, Buffett actually took a small detour from Graham's approach when he figured out that not all cheap stocks were actually undervalued. In some cases, inexpensive stock truly reflected the company's deteriorating profitability. Taking a page from another influential investor, Philip Fisher, Buffett set his sights on companies that hold a sustainable competitive advantage, because this is what allows the firm to retain pricing power, ultimately leading to outsized profits over time. In other words, Buffett looks for companies with wide economic moats.

Mr Buffett likes to find good businesses that are run by competent management, and then patiently wait until he can buy them at a reasonable price. What makes a good business? Importantly, Buffett wants to see a consistent operating history and a solid track record. Not surprisingly, the main stocks in Berkshire Hathaway's portfolio fit this profile. It also happens that many of his stock picks trade on the NYSE.