How to Use Warren Buffett's Investment Prompts for Stock Analysis

Warren Buffett's investment philosophy has created more wealth than nearly any other approach in history. Now, thanks to AI, you can apply his proven methodology to any stock with intelligent prompts.

Warren Buffett's Core Investment Principles

Before diving into prompts, let's understand what makes Buffett's approach unique:

1. Circle of Competence

Buffett only invests in businesses he understands. He famously avoided tech stocks for decades because they were outside his circle.

Prompt to test this:

Explain [COMPANY]'s business model as if I were a 10-year-old. 
What does the company sell? How does it make money? 
What are the main variables that affect its profitability?

2. Economic Moats

A "moat" is a sustainable competitive advantage that protects profits from competitors.

Types of moats Buffett looks for:

• Brand power (Coca-Cola, Apple)
• Network effects (Visa, Mastercard)
• Switching costs (Microsoft, Adobe)
• Cost advantages (Costco, Walmart)
• Intangible assets (patents, regulatory licenses)

Moat analysis prompt:

Analyze [COMPANY]'s economic moat:
1. What sustainable competitive advantages does it have?
2. How durable are these advantages over 10+ years?
3. What would it take for a competitor to replicate them?
4. Are the moats widening or narrowing?

3. Management Quality

Buffett wants managers who think like owners, not employees.

Management prompt:

Evaluate [COMPANY]'s management team:
1. What is insider ownership percentage?
2. How has management allocated capital over the past 5 years?
3. Are executives' incentives aligned with shareholders?
4. What is their track record on major strategic decisions?

4. Margin of Safety

Never overpay, even for a great business.

Valuation prompt:

Provide a Warren Buffett-style valuation of [COMPANY]:
1. What is the owner earnings (FCF) per share?
2. What growth rate is reasonable for the next 10 years?
3. Using a 10% discount rate, what is the intrinsic value?
4. What is the margin of safety at the current price?

The Complete Buffett Analysis Prompt

Here's the comprehensive prompt our tool uses for Warren Buffett-style analysis:

Act as Warren Buffett analyzing [STOCK].

Evaluate using these principles:

1. CIRCLE OF COMPETENCE
- Is this business simple and understandable?
- What are the key drivers of profitability?

2. ECONOMIC MOAT
- What sustainable competitive advantages exist?
- Brand, network effects, switching costs, or cost advantages?
- Is the moat widening or narrowing?

3. MANAGEMENT QUALITY
- Is management shareholder-oriented?
- How is capital allocated (dividends, buybacks, acquisitions)?
- What is insider ownership?

4. FINANCIAL STRENGTH
- What are the profit margins and returns on capital?
- Is the balance sheet conservative with manageable debt?
- Is free cash flow consistent and growing?

5. VALUATION
- What is the intrinsic value estimate?
- Is there adequate margin of safety at the current price?
- How does current valuation compare to historical?

6. CONCLUSION
- Would Buffett buy this stock at current prices?
- What would need to change for a "buy" recommendation?

Buffett Red Flags to Watch For

The AI should alert you to these warning signs:

Financial Red Flags

• ❌ Excessive debt (D/E > 2x)
• ❌ Declining margins over time
• ❌ Poor free cash flow conversion
• ❌ Aggressive accounting practices

Business Red Flags

• ❌ Commodity business with no pricing power
• ❌ Heavy capital requirements
• ❌ Rapid technological change
• ❌ Heavy regulatory risk

Management Red Flags

• ❌ Excessive executive compensation
• ❌ Low insider ownership
• ❌ Poor capital allocation history
• ❌ Overpromising and underdelivering

Real Example: Coca-Cola Analysis

Buffett famously bought Coca-Cola in 1988. Here's how the analysis looks:

Circle of Competence: ✅

• Sells beverages globally
• Simple, understandable business

Economic Moat: ✅✅✅

• World's most recognized brand
• Global distribution network
• High switching costs for retailers

Management: ✅

• Historically shareholder-friendly
• Consistent dividend growth
• Reasonable capital allocation

Financials: ✅

• High profit margins (20%+)
• Strong free cash flow
• Manageable debt

Verdict: Classic Buffett investment

How to Use This on PromptPad

1. Go to promptpad.directory/stock
2. Enter any stock ticker
3. Select "Warren Buffett" as your investment agent
4. Choose your AI (Grok, ChatGPT, or Gemini)
5. Launch or copy the analysis prompt

The tool automatically generates a customized Buffett-style analysis prompt for your chosen stock.

Beyond Buffett: Other Value Agents

While Buffett is the most famous, our tool includes other value investing legends:

• Charlie Munger - Mental models and business quality focus
• Ben Graham - Deep value and net-net investing
• Mohnish Pabrai - Dhandho (low risk, high return) approach
• Aswath Damodaran - Academic valuation expert

Each brings a unique perspective to your analysis.

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