3 ideas
A business worth owning has a structural advantage — a moat — that protects its returns from competition: a low-cost position, a trusted brand, or high switching costs. The right question is not whether profits are high today but whether the moat is widening or eroding, because competitors continuously attack any business earning excess returns.
Define the boundary of what you actually understand and operate only inside it; the size of the circle matters far less than knowing exactly where its edge is. Most costly errors come not from lacking knowledge but from acting confidently just past the boundary you failed to mark.
True economic value is reported net income plus depreciation and non-cash charges, minus the capital expenditure genuinely required to maintain competitive position and unit volume. Accounting earnings can flatter a business that must constantly reinvest just to stand still, so judge it by the cash an owner could actually extract.