As the head of his conglomerate Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), Warren Buffett has amassed one of the investing world's greatest all-time track records. Between 1964 and 2018, Berkshire's value increased a stunning 2,472,627%, or about 20.5% annually.
How did Buffett achieve such eye-popping results? Through a long adherence to value investing. However, contrary to popular belief, Buffett doesn't just invest in any old "cheap" stocks. Rather, Buffett waits until a high-quality business that he understands falls to a low valuation, and then loads up with a big buy, which he intends to hold for the long term.
What does Buffett consider a "high-quality" business? Specifically, one with a large economic moat, which enables a business to earn high returns on capital. Even better is such a company that's also run by shareholder-friendly managers with skin in the game.