Stig Brodersen  05:50

I think it was 2014 but I’m losing count.

Preston Pysh  05:53

Yeah, you might be right, so that shows you how good our memory is with numbers, so we were at the shareholders meeting and Buffett, he’s up there talking about one of these deals. And I wouldn’t say that the deal had happened months ago, 6, 7, or 9 months ago or something like that. And he’s talking about… One of the people would ask him this question about the company, and he just goes, “And that’s whenever we took 900, 600 or 9,600,400.” And he just spouted off this number down to the share. And I was sitting there like, “Holy, he wasn’t looking at anything.” And he was just spouting off these numbers down to like, the dollar or the share count, the individual share. It was totally mind-blowing. I was  floored and Stig and I were sitting next to each other, we just looked at each other like, “Oh my gosh, that is crazy.”

And so, the reason I tell that story is to give you an idea of how intelligent this person is, but also to tie it back to the story of him delivering these newspapers where he was keeping track of every cent he made and he was developing these financial statements. And I think that that’s important because when I started my own business and I started doing my own accounting, I truly feel like that was one of the most important things for me from a business standpoint, to start to understand how financial statements work because I was having to create an income statement, I was having to move stuff over on my balance sheet and let it sit there.

And then  when I’d sell something, I’d have to move it back off my balance sheet and list it on my income statement. I was seeing the dynamics of how that worked. And that was such an important step for me and so, Buffett was doing this as a kid. He’s doing these financial statements as a kid with his paper route, and it lays the groundwork for him now as this guy who can crack open the financial statements of any business and be like, “Yeah, that’s worth $43 a share or whatever.”

And I think that’s so important for people to understand because most people that invest in the stock market, A) They don’t even look at the financial statements, B) If they did look at the financial statements, it would look like it came from an alien planet. And I  think that if you’re not looking at that stuff, and you don’t understand how it works, your way behind the power curve and investing in individual stocks. And that’s  Buffett’s forte and he developed it as a young kid.

Stig Brodersen  08:16

One thing I think is important to realize about Warren Buffett is that it’s not only his paper route. That was not only his focus when he was a teenager, or perhaps even before then. He started to invest in stocks too, so he bought his first stock when he was only 11. I think he was 14 when he bought a farm, which he rented out to someone, but he was all over the place. He was also collecting golf balls. And when he saw that it just took too much time, he was hiring his friends to pick up golf balls, and he was facilitating all that.

Preston Pysh  08:46

So, this is a funny story that I think we’ve got to tell and I don’t think it has a lot of purposes as far as  something that’s actionable for you as an investor, but I think the story is so funny that’s worth sharing, so he’s 18 years old at this point. And he had just started getting into this business of pinball machines. And so, he comes up with the idea of putting these pinball machines into barbershops to collect money and basically work on an arrangement with the barbers.

What’s funny is, literally, I was in the mall probably last week with my son and my son’s little, he’s three years old, and he likes to ride these little amusement park rides that you put the quarters into. And I’m sitting there looking at these things. And I’m like, “This is the best business model ever. You set these things up, you step away, and man, you don’t have any issues.” So, it was funny, as we were there with my son, lo and behold, the people who own the machines came by and they were collecting the quarters out of them, so you know me, I’m there talking to this guy about their business model. I said, “This is the best business that you could possibly have.”

And he says, “Well, not necessarily. This mall in particular is  good because we don’t have any people that come in here and damage the machines or putting Chuckie cheese coins into the machines which damage them, and then they can’t collect any money.” He is basically telling me all the problems and he said, “We had some machines at this other mall, which was further away. And there were kids there, they were always damaging the machines. We got to the point where we had to pull them out.”

And so, then it made me think about this book on Buffett because this just shows you how smart Buffett is. He takes his pinball machines, and he drops them into these barbershops. And then he gets the barbershop to have some skin in the game. He basically split the profits of the pinball machine, because if the machine would break or there would be something that wasn’t working, the barber wants it to get working, so he would call Buffett and Buffett did this with one of his friends, and they’d come out and they’d fix the machine.

So even at that young age, his business model was set up for success where he knew, “I can’t take 100% of the profit. I have to give some of that up to put it in the store and also to ensure that it’s working.” He was just a business prodigy as a kid.

But this is the funny part of the story within the whole reason of me telling this, so a lot of the times, Buffett, he was so young. And I guess when he was a young kid, he looked even younger than being 18 or whatever. He had this baby face, so he had rolled into these barbershops and the barbers would be like, “Hey, what’s the chances of us getting another machine in here, you know?” And Buffett said, “We will have to take that up with management.” And Buffett would leave and he kept this mystique going on that he wasn’t the person who owned the machines. He was just the kid who is maintaining them. And he had nothing to do with like, the person who owned the machines. And so, he kept this going so that he could just expand his business. And I don’t know how many pinball machines he had. Stig, do you remember how many he had around town? It was a lot.

Stig Brodersen  11:44

There were quite a few and the thing was like the mob or something like that. It was a hilarious story.

Preston Pysh  11:51

Yeah, they were acting like they were in the mob. And, “Oh, well, we’ll have to take that up with management.” And then they’d walk out. It’s such a funny story. It was good. All right, so that’s all I had from his childhood. I’m going to throw it over to Stig so he can talk about one of his points.

Stig Brodersen  12:05

I think the thing that impressed me the most was the thorough analysis of the market research that Warren Buffett put into all of his ventures. And I think there were a ton of different stories we can tell. One of them is when he was five, and he figured out that people like to drink soda. He was going with a friend of his to the local vending machine to collect soda caps, so he was counting the number of soda caps and the brand, so at the age of five, he figured out that most people like Coke, so that was his basis for going out buying six Cokes for a quarter and then selling each of them for a nickel each.

And I think the interesting story to tell is that this is a very silly example, but he keeps doing the same thorough market research, so whenever, for instance, he started his own partnership and basically the story is known as the American Express Salad Oil Scandal, so this also tells you about the type of market research that he kept conducting. And I think there’s a lot of parallels to what he did I his early years.

So, the story is this, back in 1963, American Express owned a subsidiary that was committing a ton of fraud, so they should be owning a lot of salad oil. But basically, they owned a lot of contaminated water. It was just a complete fraud, from A to Z here. And back then, the stock price was just cut in half. I mean, all the investors were running for the hills back then. And Warren Buffett, as a shrewd value investor, and as someone that conducts a lot of market research, he’s saying, “I basically don’t think that there’s anything wrong with this business model.”

What he’s doing is not to collect soda caps. What he’s doing is that he’s sitting behind the cashier’s desk at the local Steakhouse. He is collecting the receipts that these customers are just leaving and he’s seeing that, well, people might not like American Express. And he’s seeing that people still pay with the American Express card. Like they’re unaffected about the scandal, they might not like the scandal, but they still pay with this credit card.

He would go in, and he was pouring in 40% of the partnerships’ money in that single stock. Today, Warren Buffett has to keep compounding American Express. The cost price of his stocks, he owns now, close to 15% of the company. It is $1.3 billion. And the worth is more than 14 billion. He’s just been growing his share of American Express company and it started back then when he saw a golden opportunity because the people were overreacting and he was doing thorough market research.

Preston Pysh  14:46

So, I think it’s important for people to understand this aspect of Buffett… When Stig is talking about how much his American Express has ballooned to, as far as value, and you hear these stories about how he was making money as a kid and I mean, I don’t remember the exact amount of how much he had when he went off to college. But I want to say it was around $10,000. And you got to realize the timeframe of this. $10,000 back when he went off to college is like $100,000 today with the inflation piece of it.

And so, he was able to accumulate all this money, not just because he was very smart, business savvy and saved in his teens. It’s because he didn’t spend anything. And that that’s the second part of the equation here. It’s a two-part variable that what’s coming in versus what’s going out. And he didn’t have anything that was going out. He is like one of the ultimate misers of all time. And I think a lot of people miss that piece of it and don’t realize how incredibly cheap he is. And that’s one of the reasons he’s been able to grow his net worth as well, so that’s an important part to take with you.

The other part of this that I wanted to highlight is that Buffett thinks like an owner. If you’ve got anything from these stories that we’ve started telling from the start of this episode till now, he is the ultimate business owner. And I think that that’s what sets him apart from other people on Wall Street or some of these famous investors that you hear about. Then all of a sudden, 10 years later, they’re not talked about too much. I’m not saying Bill Ackman is going to go by the wayside, but he’s one of those guys that I feel has just been an investor from day one. And not necessarily a guy like Buffett, who got his foundation of, “Hey, I want to make this business work. Hey, this is a business that I’ve been running for years. And the stock investing thing is something that’s nested inside of this leadership as a business owner.” I think that sets him apart from other investors. I think he got that foundation as a kid and I think that’s one of the reasons he’s so effective is because he thinks like an owner and he thinks like a business manager first. I think he thinks more like an investor second, and I know some people might raise an eyebrow at that, but I  think that’s why he’s so successful.

Stig Brodersen  16:58

I think one of the secrets to Warren Buffett’s success is that he’s always been able to surround himself with people that are better than himself. If not better than himself, then at least people that are good at what they’re doing. And he’s been able to delegate something to them. And I think two people that come to mind are Rose Blumkin and Ben Rosner.

So, let’s take the first one, Rose Blumkin, perhaps better known as Mrs. B, she came to the states like, 120 years ago or something like that. A long time ago, right? Perhaps even longer and she had $500 to her name. And so, with that $500, she started a shop selling furniture. And she was under a lot of pressure back then and she was struggling a lot but she always made sure to satisfy the needs of the customer, so there’s storage going but she is starting to sell her own furniture because she’s so adamant about always meeting the demand. Like she is the type of work ethic that you can only admire.

So just to give you the context to this, so she worked 70 hours a week, 52 weeks a year, she’s sold a store at Nebraska Furniture Mart, I want to say. Preston and I  went to visit that place when we went to the shareholder meeting. And she sold that to Warren Buffett when she was 89. And she kept working in the business after that. Then at the age of 95, she had a falling out with a family, so you might be thinking, well, she’s 95. She made plenty of money, she would probably just relax, though. She started a new furniture mart just across the street and Warren Buffett had to buy her out of that store too, for $5 million. A few years later, and then she returned to Nebraska Furniture Mart and worked there every day again, 70 hours a week, until age 103. That is an amazing story.

Preston Pysh  18:58

So, the best part of this is when she opened up the competitor’s store on the other side of the street. Her kids were still working in Nebraska Furniture Mart for Buffett because Buffett had some of the terms and conditions of the deal. He wanted them to continue running the business because he’s not going to step in and do it. She’s sitting with tens of millions of dollars in her pocket. Like what Stig said she was 70 or 80 years old and she moves…

Stig Brodersen  19:26

She was 95, Preston. That’s the most impressive thing. How is that possible, at 95?

Preston Pysh  19:32

She’s hardcore. And I’ll tell you, seeing when we went out there and visited the store, this store is so big and ridiculous in size. It will blow your mind. It does not fit in little Omaha. Let me tell you, you would think that there’d be a mediocre-sized furniture store there in Omaha. This thing is massive. Absolutely massive. It’s neat to see it in person.

But the story on Rose Blumkin is one that Buffett likes to tell a lot of people. If you’ve never heard the story, Google it or read it in this book, “Buffett: The Making of American Capitalist.” Read it in there. Also, there’s a good piece of it in “Snowball,” if you guys want to pick that up and read it in there. It is an awesome, awesome story.

Stig Brodersen  20:13

And another great story is the story of Ben Rosner at this cocktail party. He was overhearing this conversation between Ben Rosner and one of his competitors. They were also running retail in the city. And they’re talking about all kinds of things: what’s the cost of this and how much do you pay for that? And then one thing surprised Ben Rosner. Apparently, he paid too much for his toilet paper. And then Rosner got mad because he thought that his supplier might be cheating him, so he was leaving this cocktail party driving to his warehouse, and he was counting whether or not there were 500 sheets on his toilet paper roll. And I know it sounds like a ridiculous story. And the funny thing is he was cheated by his supplier. There were not 500 sheets of toilet paper roll. And whenever Warren Buffett heard that, or he was just saying, “Ben, I need to do business with you.”

As it happened, Ben was about to retire at this point in time. And Warren Buffett bought him out. And also, because Warren Buffett knew that Ben Rosner could not just leave his business, so, Rosner returned to the business. And one of the things I  liked about the book was that he was saying to Warren Buffett when he finally retired 15, years later, he said that “I forgot I sold to you and you forgot you bought from me.”

Preston Pysh  21:41

You know what? I think all the people that he buys the businesses from that stay in management positions, say all the same thing. They’re like, “Hey, this was like we never even sold the business.  we got a big fat check for more and he pretty much let us keep doing our thing and never bothered us. Whatever numbers we handed him at the end of the year, for the most part, he didn’t ask any questions.”

And I think that’s why he’s been… It’s crazy when you let go of the reins. Sometimes the best way to exercise authority is to relinquish your authority and let people run with it and charge them with responsibility. But I think he’s been successful in that because he’s never bought a company from somebody that he knew he couldn’t do that with. And that’s where I think a lot of people make mistakes are, they’ll go and they’ll buy a business, or you see these large companies do these acquisitions. They never even look at the management or they never even look at the culture of the employees within that business. Next thing there’s this rebellion going on because they don’t want to be a subsidiary or whatever.

I think that’s one of the big nuggets with Buffett when he’s doing these large acquisitions is, he looks at that culture. And more importantly, he looks at that key leader who’s running the business because one of the things he says in the shareholder letters, he says, “We’re not going to supply the management. It’s got to come already installed on the acquisition.” So, it speaks to the people that he’s buying the companies and it also speaks to his ability to pick it. But a great story.

23:04

All right, so I want to transition gears here and I want to talk about his experience at Salomon Brothers. A lot of people have heard this story or seen this piece of Buffett when he went out to Salomon Brothers because they had this experience with a gentleman named Moser who worked at Salomon Brothers, and he was basically conducting fraud. This gentleman was one of the lead people with their treasuries department, buying treasuries, and then selling them to customers on behalf of Salomon Brothers, and then also keeping some of the treasuries for Salomon Brothers.

And what this gentleman was doing was he was buying treasuries on behalf of the company, for these other vendors or for these other customers. But there was no agreement between the other customers and in some cases, so he would go in and maybe he would buy $10 billion worth of treasuries and he would say 3 billion of this is for customer X. Another 3 billion is for customer Y, and then 4 billion is for ourselves, for Salomon Brothers. And in all actuality, what he was doing is he was conducting fraud and that all $10 billion worth of the treasuries were just for Salomon Brothers. They weren’t for those other people that he had told the Treasury they were for.

And so, this got out and this was disastrous. And everyone was concerned about how the government was going to handle it, as far as what penalties would be invoked? How much? I mean, this was like, you can’t get a bigger disaster from a banks’ standpoint that somebody would just be straight-up lying on behalf of some of their customers on acquisitions in the billions, so this shakes out. Buffett’s shareholder of Salomon Brothers, what was the percent that he owns, Stig? Was it around 10%, I believe from the book?

Stig Brodersen  24:43

Yeah, something like that.

Preston Pysh  24:45

He owned about a 10% stake in Salomon Brothers. And so, Buffett’s the shareholder and doesn’t have too much involvement for the most part in this company, because it’s a non-operational subsidiary, but now he’s going to get involved. And so, the CEO of the company, and he comes to Buffett and he says, “You’re pretty much the only guy that can step in and bring calm to the situation and potentially save the company,” because there’s a lot of stock prices going through the floor. A lot of people were just thinking it could be the end of Salomon Brothers, to be quite honest with you.

Buffett steps in and I  liked the way that this is portrayed in this book because I think it does a lot of justice to talk about how good of a manager Buffett is, and how easily he’s able to just take something that most people would see as just total chaos and confusion, and lots of different variables that need to be solved. And he basically simplified it and just added so much calm to this storm. And I  liked how the author describes each step of this.

And so, effectively, Buffett comes in and he sits down with all the top managers within the company and he’s concerned about the culture. He makes this speech that if you were toeing the line on whether something was ethical or not, you need to step away from the line as far as possible from now until you know further notice because we’ve got to change the culture of this organization. But more importantly, what he did is he came in, he interviewed each one of these head leaders within the company, each one of the directors anyone who’s in the position to potentially take the CEO position from him at this point, because he decided to take it. Whomever that person is, he wanted to meet with them.

So, I want to say it was like 20 different people all had a meeting with Buffett and Buffett said, “Okay, so I’m going to determine who’s going to basically replace me in a few months from now. And this is how I’m going to do it. Each one of you guys is going to come in and we’re going to have a one-on-one meeting.” So, each one of these gentlemen, the 20 that were up for the job come in, and they sit down with Buffett and he says, “Okay, this is my only question. If you could pick one person to run this company, who would it be?”

And so, he interviewed all 20 people, they all said whom they thought their first pick would be. I guess three of the gentlemen pick themselves, whichever. I don’t know if that would have gone over well or not well with Buffett, but it was highlighted in the book. And so, at the end of it, he came up with the one manager that everyone basically had the agreement on who the right person was. And that’s how he picked them. And it’s just so simple. It’s just so basic, but so elegant at the same time of how he’s doing this.

27:18

And something else that I liked about the Salomon story is they talked about Buffett with the lawyers, so Buffett said, “Well, we’re going to go to Congress. We’re going to basically tell them that we’ve done all this wrong. We’re going to highlight everything that we’ve messed upon. And then we’re just going to tell them that we’re basically trying to change the culture and turn this organization around.” And the lawyer team was like, “Oh, you can’t say that.” He said, “Oh, yeah, I can.”

And he was basically like, whenever you’re advising, the lawyers, this could cost us hundreds of millions of dollars in liabilities and tarnish the name and blah, blah, blah. And Buffett’s like, “Yeah, I got that but we’re not going to listen to you. We’re going, to tell the truth here and we’re going to bring everything out.” And he did, and most people I think would have attribute…

Now looking back at this and how everything shakes out from this, I think most people would attribute the only reason that Salomon Brothers was able to come out of this is because of how truthful Buffett was. The fact that Buffett was the front man and everyone trusted him. They talked about his testimony when he went to Congress and how everyone, all the representatives were basically like, “We’re so happy you’re in here fixing this company, and we trust you.” And even though Salomon just got done doing all this bad stuff, he basically had an easy day on the hill in Congress, because he was who he was, and had the reputation that he had and because he opened up with these are all of our faults. We are in the wrong and we are going to fix this. As opposed to what a lot of lawyers often recommend not doing things like that. Buffett took the opposite approach. And I think it’s very noteworthy and very important for people to hear that story.

Stig Brodersen  28:49

I definitely think you’re right about Warren Buffett being the savior here. I think there was a specific phone call mentioned in the book where he was calling the Treasury because, at that point time, everyone is ready to close Salomon Brothers down. And he’s just calling them saying, “I need you to give me more time.” And it was granted to him because he was Warren Buffett. He was putting his own reputation on the line. And this whole story about Salomon Brothers is so interesting. It was a huge company back then it was, I think, after Citigroup. It was the company in the States that has most liabilities, so I mean, it was a huge, huge company. And one thing I’m   curious about, I’m  looking forward to is that in a few episodes from now, we’re going to talk about the book “Liar’s Poker.” And “Liar’s Poker” is about Salomon Brothers and all the things that were happening with the bonds back then. And it’s written by Michael Lewis. Michael Lewis that we also talked about previously in this podcast. And one thing I found interesting in “Buffett: The Making of American Capitalist” is that Michael Lewis is not a fan of Warren Buffett. It was not clear to me why. I don’t know if you remember that, Preston, but he was like the entire fan of Warren Buffet if you ever saw one, so I think it would be interesting to read both stories.

Preston Pysh  30:06

Yeah, I think if I remember right in the book, they were talking about how he thinks Buffett’s more of a hypocrite because he’s doing this profit thing and he’s also trying to help people. I think that that might be where it was centered around. It didn’t get into the specifics in the book, but Stig’s right. I guess Michael Lewis isn’t a huge Buffett fan, so we’ll see what “Liar’s Poker” says.

It’s interesting, I guess when he was on the hill, and he was testifying, somebody had brought up, “Hey, have you read the book “Liar’s Poker.” So, somebody on the Hill was asking Warren, “Hey, did you read the Liar’s Poker?” And Buffett said, “Yeah I have a few years ago.” And the person then basically came at him hard after he had read the book and said, “Well, is that  what’s happening?” And he said, “Well, what I’m trying to do here is I’m trying to prevent the second edition of Liar’s Poker,” which I thought was a good response. But that was a  great story. It’s worth your time to read about the Salomon Brothers stuff in the book.

31:00

So, in chapter 18, it’s titled Secrets of the Temple. We’ve talked about this. In fact, I think we did a whole podcast early on, maybe the third podcast where we talked about Buffett’s rules. A lot of those ideas are laid out in chapter 18. I’m not going to get into the nitty-gritty of this stuff, because we’ve done a lot of discussion on this in the past. We’ve got it at the Buffett’s Books website that goes through pretty much all of this stuff. There are 10 hours of video learning content there in Buffett’s Books, if you’ve never checked it out. I highly recommend you go to BuffettsBooks.com and check out all of our videos that talk about the stuff that’s contained in chapter 18.

Real quick, it talks about four key points. It talks about him buying undervalued businesses. He doesn’t talk about intrinsic value and how he calculates it or anything like that in this book that we’re reviewing right now. Then he talks about basic trends and long-term businesses that you can basically see consistent profits, consistent cash flow, and picking a business like that.

The other thing that he talks about is staying in your area of competence, which we also talk about a lot. And then the last thing is picking managers that treat the shareholders or investors’ money as if it was their own, so those were some of the highlights. And he also talks a little bit about competitive advantage. Those are the highlights in chapter 18, where he talks about the Secrets of the Temple. All right guys, so there was a lot more in this book. I want to say how many chapters were in this book, there were 23 chapters. And some great storytelling. I think that that’s the thing that you’re probably going to enjoy most about the book is the storytelling. There are many times I was laughing pretty hard at some of the stories, so I would highly recommend this book. If you’ve never read anything on Buffett, I would start here.

I also recommend “Snowball.” I think this was a little bit of a less negative twist on Buffett, I would say. I think the “Snowball” was a little bit more negative towards his personality, so depending on what your personality is, you might want to steer towards one or the other. But it was a very good book. I enjoyed it.

And at this point, we’re going to take a question from our audience. And this question comes from Patrick Reagan.

Patrick  33:01

Hey, Preston and Stig, this is Patrick here. Firstly, guys, thank you for putting together such an amazing show. I only came across The Investor’s Podcast a couple of months ago. And I think I listened to pretty much all the episodes in a week. Always great to hear what you guys have to say. I have a two-part question today.

The first part of which leads to how you guys generate ideas for which stocks and industries to research, so a lot of reading into how to assess potential investment opportunities. But I’d be very keen to know how you guys decide on which stocks and industries you are going to spend your time on. It’d be great if you could give some context for investors based outside the US because I’m currently living in Asia.

The second part of my question relates to how do you prevent yourself from spending too much time researching an idea or stock? I mean, given that you could spend weeks or even months looking at an opportunity for a turn out to be not as good as you thought it would be. Do you guys have any processes or red flags that prevent you from diving too deep into a stock? Okay, thanks and keep up the great work. S

Preston Pysh  33:56

Patrick, fantastic question. I  like this one, I’ll tell you, I  use stock screeners a lot just to see what value might be out there. One of the issues that I run into a lot whenever I get with that approach though is that you get a lot of companies with a low or a very small market cap. And so, you are potentially assuming risk when you get into some small business and you’re doing individual stock picks.

I’m not telling you to not do that by any shape of the imagination, I’m just telling you, you see a lot of good values with the lower market cap type businesses, especially in today’s market. That would change as the market conditions change. And then that leads into your next question, which is if you are buying a small-cap business, and you want to maybe mitigate some of that risk, you’re going to want to put a smaller portion of your portfolio in it, so then you’re spreading your breadth of now I’ve got 30 picks to distribute that risk across multiple picks. And how am I able to do a lot of research and fully understand and know every amount of information I need to know about each one of those businesses?

And so, that’s a hard thing to get out to be quite honest with you. And I think it comes down to personal preference. And what’s your risk strategy is? So, for me, I’ve stepped away. And it might be more the market conditions. I’ve stepped away from a lot of individual companies with a low market cap. I’ve  I’d say in the last four years, focused more on large-cap companies. And that’s just my personal preference. I don’t know why I’ve done that. I think I’ve just tried to minimize my risk exposure.

But I also want to highlight just because you’re looking at a large-cap company, look at the Salomon Brothers thing that we were just talking about. There’s a large-cap company that almost went by the wayside because of one person, so it’s hard to say one way or the other, but I think historically, you’re going to find that large-cap companies don’t necessarily get impacted by a person as much as you would see with a small-cap company being as risky. I don’t know if I  answered your question. Well, I want to throw it over to Stig because he’s probably going to have a lot better answer than I just gave you.

Stig Brodersen  36:14

I don’t know about Preston, but for the first question about generating ideas, so I will also agree with Preston. Well, I have two approaches. The first one is a stock screener. I usually use Google stock screener, it’s easy to use, and it’s free. And if you want to learn more about the criteria that Preston and  I use, you can go into our website, The Investor’s Podcast, and find that checklist that we have, which is the first inputs that we have for our screening process.

So usually, I would play around with the numbers, come up with 10 to 20 stocks, and that will be my starting point for further analysis. Another source that I think I’m starting to use more and more, that is the Mastermind group approach, so basically, these are people I  trust. I use them as my stock screener, so I know this might sound odd, but I have some people that I   trust, so if Preston is telling me that he’s buying something, well, then I know it’s been through a  good process that might be something else, you take a close look at. The same with Hari, which I should probably jump on to a Skype conversation with like, once a month or something and we discuss various stock picks.

Preston Pysh  37:24

And Stig, I just want to highlight on your comment there, the WarrenBuffettForum.com, so we use that forum. Let me tell you, I’ve got a lot of fantastic ideas from the forum. There, the people, they’re talking about some of the different picks, but you guys got to realize this culture here at The Investor’s Podcast and Buffett’s Books. It’s been… I don’t even know how many years at this point. But we’re starting to develop a culture where people are using these Warren Buffett principles to talk about different stock picks on the market, so you want to talk about a great filter mechanism and I’m I know I’m heavily promoting our own product here, but it’s completely free, so it’s not like we have anything to gain from this, but use that forum, go on that forum, you would be amazed at some of the conversations people have and which tickers they’re highlighting. I  think it’s extremely useful. I’ve personally used it with some of my own picks that I’ve conducted, came straight out of the forum.

Stig Brodersen  38:17

Yeah, I definitely agree with you. And I have also been in the forum for so long now that I know which users, I should pay special attention to, so if someone like Chris saying, “Hey, I’m looking at this stock, you know?” That like he’s the best stock screener you can get, a lot lower if he’s buying something, so definitely I agree with you, Preston.

So, I’ll tell you, folks, we’re going to try something new today, so if you go to #TIP64, we will try to answer any of your questions there. If you guys throw us a question on Twitter, we’ll try to respond to and further elaborate. Or if you have a point that you want to make about this question that we just answered, you want to highlight Maybe something outside of a stock screener, which you think is a great way to analyze or find companies: #TIP64 on Twitter. And we’ll blast that out to the community.

So that’s all we have for you guys. We’re going to send Patrick Regan a free signed copy of our book, the Warren Buffett Accounting Book. And for anybody else out there, if you want to get your question played on a show, go to asktheinvestors.com, you can record your questions there. And for anybody who gets their question played on the show, we’ll send you a free signed copy of our book, so we appreciate everything everyone’s doing out there in our community. We have the best community in the world, so, thank you, guys. And we just enjoy doing this podcast with all the people in our community, so have a great week, and we’ll see you guys next week.

Outro  41:34

Thanks for listening to The Investor’s Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www.theinvestorspodcast.com. Submit your questions or request a guest’s appearance to The Investor’s Podcast by going to www.asktheinvestors.com. If your question is answered during the show, you will receive a free autographed copy of The Warren Buffett Accounting Book. This podcast is for entertainment purposes only. This material is copyrighted by the TIP Network and must have written approval before commercial application.