Warren Buffett has shared a lot of stock market wisdom over the years that investors continue to take to heart. Among his most important tips were included in a 2013 letter to shareholders of Berkshire Hathaway.
In the letter, he mentioned a stock-buying test that he and Charlie Munger adopted. Here’s the short version:
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Decide whether you can “sensibly” estimate a company’s earnings range for the next five-plus years. If so, buy the stock — but only at a “reasonable” price.
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If you can’t estimate future earnings, “move on to other prospects.”
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Don’t ever skip a good buying opportunity based on the macro or political environment, or the views of other people.
Here’s a look at why that stock-buying test is more relevant than ever in 2026.
The U.S. stock markets have been on a record-setting run for more than three years. That run has continued in 2026 — largely because of the kind of positive earnings environment that Buffett spotlighted in 2013.
An “improving” corporate earnings outlook is reflected in “steadily rising” estimates,” according to a recent report from Zacks Investment Research. In fact, total S&P 500 earnings are expected to grow by 12.9% in 2026, with that number falling to 9.3% when the tech sector is taken out.
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The U.S. geopolitical environment is anything but stable so far in 2026. But many investors seem to have taken Buffett’s advice by ignoring political tensions and buying stocks.
Despite some stock market tumult early in 2026, as of Feb. 12, the S&P 500 was up by about 1.35% for the year, while the Dow had gained 3.96%. That’s the case even though tensions have risen abroad and at home in 2026.
“What markets are saying is that unless it’s a variable that really alters consumer or business activity, there isn’t really much of a broad-based reaction across more traditional asset classes,” said Eric Freedman, chief investment officer at Northern Trust Wealth Management, said in an interview with Marketplace.
For the most part, investors seem to be taking Buffett’s advice by not letting the macro environment dictate their stock decisions.
For proof, look at the reaction after news hit that the Justice Department opened a criminal investigation into the Federal Reserve and Fed Chairman Jerome Powell. The S&P 500 initially tanked on Monday, Jan. 12, but reversed course and ended the day at an all-time high, CNBC reported.
