Wonderful Company at Fair Price - AI Analysis Prompt
Use this Warren Buffett rule prompt to apply “Wonderful Company at Fair Price” to a specific company. It turns a vague opinion into a repeatable checklist: what facts you must verify, which assumptions matter most, what would invalidate the thesis, and the common misreads that create false certainty. Expect a written output you can save: a thesis summary, key risks, and next-step questions for filings and earnings calls. If a claim matters, require primary-source citations before you act. Educational only — not investment advice.
Full Prompt
You are a quality-focused investment analyst trained in Warren Buffett's principle of buying "a wonderful company at a fair price." Your task is to evaluate whether {Company Name} qualifies as a wonderful company and whether its current price is fair.
## Analysis Framework
### 1. Economic Moat Assessment
- What is the company's competitive advantage? (Brand, patents, network effects, switching costs, cost advantages)
- How wide is the moat? Rate it: None / Narrow / Wide
- Is the moat getting wider or narrower over time?
- Can competitors replicate this advantage within 5 years?
- What would it cost to build this business from scratch?
### 2. Business Quality Metrics
- Return on Equity (ROE) over the past 10 years — is it consistently above 15%?
- Return on Invested Capital (ROIC) vs. Weighted Average Cost of Capital (WACC)
- Gross margins and operating margins — are they stable or improving?
- Free cash flow conversion rate (FCF / Net Income)
- Revenue predictability and recurring revenue percentage
### 3. Pricing Power Test
- Can the company raise prices without losing customers?
- Evidence of pricing power in the last 5 years
- How does the company perform during inflationary periods?
- Customer dependency and brand loyalty indicators
- Market share trends over the past decade
### 4. Growth Quality Assessment
- Is growth organic or acquisition-driven?
- Reinvestment rate and return on incremental capital
- Total addressable market (TAM) and penetration rate
- International expansion opportunities
- Is the company a "compounding machine"?
### 5. Fair Price Determination
- Current P/E ratio vs. 10-year average and industry median
- PEG ratio analysis
- Owner earnings yield (Buffett's preferred metric)
- What price would represent a "fair" price for this wonderful company?
- Compare current price to your fair value estimate
### 6. Verdict: Wonderful Company at Fair Price?
- Is this truly a wonderful company? (Yes/No with evidence)
- Is the current price fair, overvalued, or undervalued?
- Would Buffett add this to his portfolio today?
- Long-term holding potential: 10+ years?
## Output Format
Structure your response with clear data-driven sections. End with a "Buffett Verdict" paragraph.Related reading (close the loop)
Pick one path below to turn the output into a checkable, repeatable decision policy.
- Read the matching principleDefinition, boundaries, pitfalls, and a minimal checklist.
- Master profileMethodology summary + common misreads for this framework.
- Practice in scenariosTranslate conclusions into “what I do under stress”.
- More prompts from this masterTriangulate with multiple rules instead of anchoring on one prompt.
Educational only. Verify facts with primary sources and apply your own constraints.
Basic Questions
How is "fair price" defined? Isn't cheaper always better?
Graham (early Buffett): Buy mediocre companies at extremely low prices ("cigar butts")
Buffett (now): Buy wonderful companies at fair prices
"Fair price" means:
- You don't need a deep discount (below 50%), 70-80% of intrinsic value is fine
- The key is that company quality is good enough that long-term compounding overcomes the valuation premium
- A company with 25% ROE, even bought at 15x PE, will far outperform a company with 8% ROE bought at 8x PE over the long term
Usage Tips
How to use this prompt to screen companies?
Step 1: Quick Screen (5 minutes)
Use financial websites to filter for companies with ROE>15%, gross margins>40%
Step 2: Moat Assessment (use this prompt)
Run the prompt on screened companies, focusing on "Economic Moat Assessment" and "Pricing Power Test" sections
Step 3: Valuation Check
Focus on the "Fair Price Determination" section, confirm current price isn't significantly overvalued
⚠️ Don't analyze too many companies at once — deep analysis of 3-5 companies is more valuable than shallow analysis of 20
Getting started
Does this prompt give investment advice or buy/sell calls?
What inputs should I provide for a reliable result?
Validation and boundaries
How do I validate the output?
When should I NOT act on the output?
More Rule Prompts
Explore other investment principles from this master.
Never Lose Money
Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.
→When to Sell
When the facts change, I change my mind. What do you do, sir?
→Admit Mistakes
Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
→Greedy When Others Fearful
Be fearful when others are greedy and greedy when others are fearful.
→Courage to Act
Have the courage to act when opportunity presents itself. Hesitation leads to missed opportunities.
→Circle of Competence
Know your circle of competence and stay within it. The size of that circle is not very important; knowing its boundaries, however, is vital.
→Gradual Position Building
I never try to buy at the bottom and I always buy too early. But that doesn't matter because I have long-term goals.
→Insist on Margin of Safety
Never pay more than a business is worth. Wait for prices that provide a significant margin of safety. Being patient for the right price is more important than finding great businesses.
→Dollar Cost Averaging
If you like spending six to eight hours per week working on investments, do it. If you don't, then dollar-cost average into index funds.
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