How to Buy a Wonderful Company at a Wonderful Price in 3 Steps

How do you find wonderful companies at wonderful prices?

In this quick guide, I’ll show you a simple 3-step process to help you do just that.

Don't Buy Cigar Butts

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett

Many investors fall into the trap of buying "cigar butt" stocks.

These are beaten-down, cheap companies with just a puff or two of value left.

The low price might seem like a good deal, but the long-term prospects usually aren’t.

you’ll likely end up with a portfolio full of low-quality stocks.

Instead of chasing bargains that come with baggage,

focus on buying great companies at great prices

3 steps to picking wonderful companies at wonderful prices:

1. Screen for Quality

2. Build Your Watchlist

3. Wait for the Right Price

1. Screen for Quality

Start by cutting through the noise.

The market is full of distractions—flashy stocks with hype but little substance.

Instead, focus on companies with solid fundamentals.

Look for businesses with strong balance sheets, high returns on equity, and consistent earnings growth.

These qualities are signs of a company that knows how to manage its finances and generate profits efficiently.

Using a stock screener can help you quickly filter out companies that don’t meet these criteria.

Set your screener to focus on metrics like debt levels, profit margins, and return on equity.

This will narrow down your list to high-quality businesses.

But numbers alone aren’t enough.

It’s important that you understand the business itself.

Ask yourself:

• Do you know how the company makes money?

• Does it have a competitive edge that keeps it ahead of its rivals?

• Is its growth strategy clear and realistic?

Your goal is to find businesses that not only look good on paper but also make sense to you as an investor.

These are companies you can hold onto with confidence, even when the market gets rough.

Finding these kinds of businesses puts you in a stronger position to invest wisely, avoid unnecessary risk, and build long-term wealth.

2. Build Your Watchlist

Once you’ve found strong companies, add them to your watchlist.

Patience is key here.

The watchlist is your tool for staying prepared.

It’s not enough to know what companies you want to invest in—you need to wait for the right time to buy.

Set price alerts can make this process easier.

You don’t have to watch the stock every day—let the alerts do the work.

When the price drops to a level that matches your criteria, you’ll get a notification.

The goal is to buy when a great company is trading below what it’s really worth.

By staying patient and keeping a watchlist, you increase your chances of finding those golden opportunities that lead to long-term gains.

It’s about being ready, not rushing in.

3. Wait for the right price

The best buying opportunities often come when the market is down,

or when a strong company faces temporary challenges.

This is where patience really pays off.

Instead of jumping in too quickly, wait for the market to give you a great business at a bargain price.

Market downturns can be stressful, but they’re also where you’ll find the best deals.

When a good company’s stock drops due to short-term issues, that’s your chance to buy.

Remember, the market always offers more chances if you’re willing to wait.

You don’t need to rush—being patient and disciplined will help you find better opportunities over time.

By holding out for the right moment, you can buy quality businesses at prices that set you up for long-term success.