Warren Buffett’s 2 Criteria for Buying Stock in 2025 — Here’s What To Consider
Written by
Peter Burns
Edited by
Molly Sullivan
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With the volatility of the markets after President Donald Trump’s tariffs and the subsequent 90-day pause, investors may be looking for some guidance in their choices. Luckily, investing legend Warren Buffett has some advice on what he considers before buying any stock. Buffett’s savvy has raised Berkshire Hathaway’s share price from $7.50 in 1962 to almost $800,000 today.
Here are two of Buffett’s criteria for buying stock in 2025.
Estimate Long-Term Earnings
The first thing Buffett and his late partner, Charlie Munger, have done when picking a stock is estimate the earnings. While this may sound obvious, it’s a comprehensive calculation on Buffett’s part, and he’s not just looking for profits — he’s looking for long-term value. In a Berkshire Hathaway letter to shareholders, Buffett explained that they must be able to sensibly calculate earnings for a minimum of five years, as Buffett is a big enthusiast for holding stocks.
If you’re going to invest in a stock, Buffett suggests holding on to it for a while.
“You shouldn’t buy stocks unless you expect, in my view, to hold them for a very extended period and you are prepared financially and psychologically to hold them,” he said.
Buffett has gone on record saying that when he buys a stock, it’s always with the thought of holding it for more than a year, with it often stretching into decades. If you’ve researched the stock and you believe it will gain value over time, there’s no reason to sell in the short term. On the other hand, if you do research on a stock but aren’t able to reasonably determine its long-term profitability, there’s no reason to buy the stock in the first place.
With today’s market volatility, assessing a stock’s long-term value may be difficult. In this case, Buffett has previously suggested not jumping in on a whim and investing just because there is a dip. However, if you can find a stock you believe has long-term value, buying and holding it can help mitigate the effects of short-term market fluctuations.
Buy Low
Buffett’s second piece of advice is to buy a stock “if it sells at a reasonable price in relation to the bottom boundary of our estimate.” Buffett likens buying and selling stocks to Aesop’s saying, “A bird in the hand is worth two in the bush.” In other words, the only reason to buy a stock today is to get more money later on. This means understanding the company’s intrinsic value and buying when the price is lower than it should be.
Buffett defines intrinsic value as the value of all cash that the company will distribute to you between today and the end of the world. The amount of cash you’ll get over time for your investment is your main concern, more than the volume of the stock, how many analysts will recommend buying it or how the charts look. Analyze the company’s earnings and the moves it’s making for future success to determine if you think the stocks are selling below the intrinsic value. If they aren’t, Buffett wouldn’t recommend buying. But if you believe the stocks are low, they could be a good investment.
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