Legendary investor Warren Buffett announced his retirement last week, after a career spanning approximately 75 years as one of the most successful investors in the world. The man known as the Oracle of Omaha has amassed an estimated net worth of $169 billion, according to Bloomberg. So, how did Warren Buffett find the best businesses to invest in?

How did he do it? Warren Buffett, at 94 years old, is the CEO of the parent company, Berkshire Hathaway. According to a report from CNBC International, Buffett thinks about potential investments like a “castle” when deciding which companies to back financially, as described by his long-time friend and Microsoft co-founder, Bill Gates.

“Warren likes to say that a good business is like a castle, and you should think about it every day. Is the management expanding the moat, or is the moat shrinking?” Gates wrote for the Harvard Business Review in 1996, as quoted on Monday (May 12, 2025).

In this analogy, the castle’s moat represents the business’s fundamental base, with intrinsic value, as Buffett has previously stated. To determine intrinsic value, Buffett looks beyond the latest performance of public company stocks and evaluates factors like consistent earnings, cash flow conditions, and the level of debt the company has.

“(Buffett) loves reading annual reports as much as he can. He looks at how the company has evolved and what their strategy is,” Gates said. He added that Buffett also aims to determine whether the business can withstand intense competition. Businesses with little or no debt and consistently positive cash flow, for example, are music to Buffett’s ears.

“When you try to assess intrinsic value, everything relates to cash flow. The only reason to put money into any investment now is because you expect to pull cash out,” Buffett said at the Berkshire Hathaway annual meeting in 1997. After being satisfied with his research, Buffett acts deliberately and rarely hurries, as noted by Bill Gates.

Warren Buffett’s value investing style involves thinking long-term and holding assets for extended periods, regardless of short-term market fluctuations. He prefers business models that he believes are fundamentally sound, as Gates refers to one of Buffett’s famous sayings.

“You should invest in businesses that even a fool can run because one day a fool will,” he remarked.

Determining whether a business is safe or not is difficult, according to Warren Buffett. He admitted that he is drawn to companies that have monopolized their particular market or “monopolized” their business segment, such as a newspaper in a town without competing publications, he told the Financial Crisis Inquiry Commission in 2010.

He also watches businesses that are fundamentally healthy but poorly managed. He sees this as an opportunity to step in and place stronger leadership, hoping to help the company reach its full potential.

“We try to figure out why the castle is still standing? What will keep it standing or cause it to fall five, ten, or twenty years from now? What are the main factors? How permanent are those factors? How much do those factors depend on the genius of the ruler of the castle?” Warren Buffett explained during the 1995 Berkshire Hathaway annual meeting.

Over the following decades, Warren Buffett consistently adhered to the same philosophy. In his most recent annual letter to Berkshire Hathaway shareholders, published on February 22, 2025, he wrote about his decision in 2019 to invest in five large Japanese companies that he believed were undervalued. He also shared his subsequent decision to increase his stake in those companies.

“We just looked at their financial records and were astonished by their low stock prices. Over time, our admiration for these companies has only grown,” Buffett stated.