Berkshire Hathaway founder and chairman Warren Buffett's famous line, “Price is what you pay, value is what you get”, in his shareholder letter of 2008, highlights a core principle of investing, which is that the market price of an asset does not always reflect its true worth.
For instance, a stock may appear overvalued or undervalued based on its current trading price, but what really matters is the underlying business, which includes the company's earnings, growth potential, and long-term prospects.
These factors are essential for determining how the company will perform in the near future and whether its shares have the potential to deliver stellar returns to investors and become a multibagger stock later.
What does the quote mean for investors?
In simple terms, buying a stock at a low price is not necessarily a good deal. Similarly, making a high-cost purchase doesn’t always mean it has the potential for future growth. This holds true for penny stocks, which often attract investors with their low entry prices and potential for rapid gains. However, they also come with substantial risks.
Due to low liquidity, high volatility, and limited transparency, they are usually susceptible to manipulation and sudden price drops. Without a clear strategy and solid risk controls, investors may face more losses than gains if they rely solely on the stock's price rather than the company's fundamentals.
The quote also underscores the importance of patience and discipline. Markets often misprice assets in the short term due to sentiment, news, or speculation, creating opportunities for those who can identify value. Investors who stick to this principle are more likely to avoid impulsive decisions and build wealth steadily over time.
Buffett has offered valuable investment advice over the years. Referred to as the ‘Oracle of Omaha,’ Buffet is popular among traders and investors for his long-term approach to stocks, his focus on fundamentals, and his calculated yet thoughtful risk-taking.
Building on his principles, one of Berkshire's key strategies is to avoid speculative trades, as it may lead to losses. It instead focuses on strong balance sheets, predictable earnings, and capable management teams, which Buffet believes is the key to wealth creation.
From early life to net worth — All about the ace investor
Buffett was born to Howard and Leila Buffett on 30 August 1930, in Omaha, Nebraska. His father worked as a stockbroker and a four-term US congressman. Howard Buffett was a member of the Republican Party, according to Investopedia.
Making money was an early interest for Warren, who sold soft drinks and had a paper route. When he was just 14 years old, he invested the proceeds from these endeavours in 40 acres of land, which he then rented for a profit.
He later applied to the University of Pennsylvania and was accepted at the age of 16. However, he left that university after two years and transferred to the University of Nebraska. Later, he also attended Columbia University for higher education after being rejected from Harvard.
Though Buffett started working with his father at his stockbroking company, he later accepted a job in New York with Benjamin Graham, the father of value investing. Buffett studied under him at Columbia. He married Susan Thompson in 1952.
How did Buffet and his friend build Berkshire?
Warren Buffett, alongside friend and business partner Charlie Munger, was the architect who over nearly 60 years transformed Berkshire Hathaway Inc. from a failing textile maker into an empire worth billions. Decades of compounded returns made the pair billionaires and folk heroes to adoring investors.
In January this year, Buffett handed over the company and his CEO position to successor Greg Abel. But his “bull run” with Berkshire has been legendary — delivering returns of more than 55,00,000% returns over 60 years (1964-2024), to building the group to $1.2 trillion, and expanding Class A shares to a value of $167 billion.
Known as the ‘Oracle of Omaha’ for his surprisingly accurate predictions on stocks, Buffett gained fame and investor confidence for handpicking companies, such as Apple, Bank of America, Coca-Cola, and many more. These stocks surged massively and now account for 70% of Berkshire's estimated $274 billion stock portfolio, according to Fintel.
Buffett's net worth is estimated at $145 billion, making him the 9th-richest person in the world, according to Forbes data, as of the time of writing.
Other popular quotes by Warren Buffett
Buffett is known for his investment advice and uncanny predictions. His quotes have been an inspiration for many market participants over the years. Here are his top five quotes that are often mentioned:
— ‘No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.’
— 'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.'
— ‘A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.’
— 'If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.'
— 'It takes 20 years to build a reputation and five minutes to ruin it.'
