Reading through the library of YCombinator, came across this awesome "lesson on elementary worldly wisdom" by Charlie Munger.
Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return—even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result.
So the trick is getting into better businesses.
Warren Buffett was a true "Grahamite", and started by investing only in the businesses available at cheap valuations (and even liquidate them if required).
However, Munger realized "that some company that was selling at 2 or 3 times book value could still be a hell of a bargain." It was then that they started thinking about better businesses.
And the "bulk of the billions in Berkshire Hathaway have come from the better businesses."
Do read the complete lesson if you love investing.