The requirements of the Warren Buffett investment from the producers of billionaires are amazing. But his approach to buying and maintaining shares in immense, proven and eminent companies is actually quite basic.

Like many private investors, some of what I do myself are inspired by Buffett, although on a much smaller scale. Here are three things that Buffett is considering when looking at the actions.

Moving in the way the company earns money

Even a good business can have a bad year and deviate from profit to loss. However, in the long run, Buffett’s interest was mainly about buying shares in companies that have already proved to be profitable and looked like consistent generation of profits.

This means that it is crucial to understand how business works. It is also crucial to deal with the financial situation. For example, the company can be profitable at the operational level, but so burdened with the debt that it is generally losing money.

That is why it is crucial to understand what the company is doing, how it earns money and whether earning money means that the company can generally earn money.

Buffett sticks to what he knows while investing – he calls it his “Circle of Competence“In his opinion, it is irrelevant, how wide or narrow the investor’s competence is. It is crucial that they recognize and avoid temptations to go astray.

Assets that are still paying off

Buffett has invested in many capital industries that regularly need modern equipment, from the power plant on the line. But in turn, many of the purchased ones he bought can be found in companies that are able to “Rock your resources“Long after paying them.

Coca-Cola (NYSE: KO) is a good example. The producer of non -alcoholic drinks spent decades by investing in building his brands. Today’s sales employ the investment that the company made several dozen years ago. In fact, even if Coca-Cola has never made another penny on marketing, I think her brands would keep a significant appeal for consumers for decades.

The economy of such business can be attractive because they are not very relying on immense, repetitive investment outlays.

Each action has its price

Buffett sometimes watches the company for decades before investing in it. Together with others, such as Coca-Cola, he builds participation and then does nothing. Buffett remains a immense investor in the industry-but from the 90s he has not bought a single Coca-Cola campaign.

The main investor still has a immense one Apple Stakon – but has sold many Apple shares in the last few years. Why? We don’t know for sure. But it is clear that Buffett does not just want to buy gigantic companies – he wants to do it at an attractive price.

Coca-Cola shares are now much more costly than when Buffett bought his own. But the company is in the face of greater competition, from niche start-ups to the wave of drinks, which emphasize their health benefits compared to sweet carbonated drinks.

This is a risk for Coca-Cola’s future profitability. Like Buffett, I think Coca-Cola has a very robust business-but it doesn’t plan to invest at the current price of the action.