A crystal ball would be the ultimate tool for any investor, but given that we’re not living in a fantasy world, how do top investors prepare for an uncertain future?

With the inevitability of market downturns, finding a balance between generating returns and being ready to strike when the iron is hot can be a tricky position to navigate.  Discovering that equilibrium, along with the patience to hold on through the ups and downs once you’ve bought into a great company, can be what makes or breaks a portfolio in the long run.

On this week’s episode, the deep analysis of the 2023 Berkshire Hathaway shareholder letter continues as Phil and Danielle wring every ounce of wisdom from Buffett’s annual communiqué..

For help with future-proofing your portfolio, click here for a free copy of The Ultimate Stock Market Crash Survival Guide:  https://bit.ly/3xNXFlf

Topics Discussed:

• Munger’s influence on Buffett’s philosophy
• Investing in the information age
• Mutual funds vs ETFs
• Modern market volatility
• Forgoing returns to prepare for downturns

Resources Discussed:

• Berkshire Hathaway shareholder letter
• Wilshire GDP ratio

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Here’s a scenario: you’ve identified a potential investment, you’ve gone through the checklist and done your research, and you decide that you’ve found a deal that other people seem to be overlooking.  You pull the trigger to buy into this company, and then the stock price begins to decline and you begin to wonder if you’ve made a mistake.

Knowing the difference between having confidence in your investing process and being arrogant or blindly confident in a position can allow investors to act on proven strategy as opposed to being driven by fear and emotion.  Having a long-term outlook and a diligent methodology is the way for capable value investors to find the deals and realize the returns that many others in the market get wrong.

This week, Phil and Danielle tackle another constant issue for investors as they dig into when, how, and why you should (or shouldn’t) stick with a purchase that doesn’t seem to be panning out the way you’d suspected.

For help finding businesses that you feel confident investing in, click here for the “3 Circles” Exercise Guide:  https://bit.ly/3LOexg2

Topics Discussed:

• Patience and discipline in value investing
• The dangers of hubris and confirmation bias
• Informed assumptions vs speculation

Resources Discussed:

• Berkshire Hathaway shareholder letter (2013)

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Free cash flow can be a golden ticket in the hands of a company with the right leadership. They can use it to supercharge innovation, expand their reach, or reward shareholders with dividends or buybacks, and for value investors, it’s like spotting a diamond in the rough.

After the growth and maintenance expenditures are accounted for, the way a company deploys its additional capital can signal the strength of management and the potential for future returns. As Buffett tells us in his recent letter, once you’ve got companies that check all of the boxes he’s looking for, this is the icing on the cake.

Join Phil and Danielle as they continue their analysis of this year’s shareholder letter from Berkshire Hathaway, pulling out key takeaways that might’ve been overlooked by some readers.

For help in crunching the numbers in your investment research process, click here to get your free Rule #1 Calculators for Investing Analysis: https://bit.ly/42dBHSn

Topics Discussed:

• Individual values in investing
• Entrepreneurship
• See’s Candy
• Operating cash flow
• Growth/maintenance capital expenditure
• Rare companies

Resources Discussed:

• Berkshire Hathaway shareholder letter

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As detailed in the most recent edition of Berkshire Hathaway’s annual shareholder letter, finding success in value investing doesn’t require fancy credentials, obsessive research, or exploitative scheming — it takes common sense and the willingness to keep yourself informed about your investments.

In a world full of people rabidly vying for your attention in every imaginable arena, knowing how to focus that attention on what’s important while weeding out the noise of the pundits and snake oil salesmen is what separates successful investors from the rest of the pack.

In this week’s show, Phil and Danielle get a bit more granular on the most recent Berkshire Hathaway shareholder letter and discuss what separates Bertie Buffett from her competition.

To get the inside scoop on more ways industry leaders mislead investors, click here for your free copy of The 3 Greatest Stock Market Myths Ever Told: https://bit.ly/45NycoE

Topics Discussed:

• Flashy and half-baked or simple and flawless
• Simplifying the research process
• Snowboarding lessons for investing
• Typical CEO letters
• Punditry vs information

Resources Discussed:

• Berkshire Hathaway shareholder letter

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“Character reveals itself in adversity” is a saying that can not only apply to the human race and how our true nature shines through when faced with a challenge, but also one that can apply in the business world. Although brand loyalty can be a common trope in 21st century consumer culture, how does that sentiment hold up when the rubber meets the road?

In these times of inflation, shrinkflation, and other types of -ations that we’ve yet to ascribe catchy names to, some brands are seeing once-loyal customers jump ship and look for better value as prices rise. While some brand relationships can’t stand the test of time, perhaps we can look to the long-lasting friendship and business partnership of Warren Buffett and Charlie Munger for inspiration.

In this week’s episode, Phil and Danielle are back to talking from different continents (and dealing with the inherent technological mishaps of that setupt) as they discuss what constitutes a brand moat, and how strong that supposed moat can be in moments of economic instability.

Think you know Warren Buffett as well as the people who’ve spent decades building Berkshire Hathaway with him? Take our Buffett quiz and find out for yourself: https://bit.ly/43qtOLz

Topics Discussed:

• Jackson Hole, WY
• Heliskiing/snowboarding
• Unilever dumps Ben & Jerry’s
• Brand moats
• Buffett and Munger’s friendship

Resources Discussed:

• Cambridge Long COVID study
• Berkshire Hathaway shareholder letter

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In a vault episode from the early days of the podcast, explore the world of value investing in this as Phil and Danielle delve into the power of dividends. Discover how making well-researched, long-term investments can potentially amplify returns and provide a steady income stream. They discuss the strategy of reducing risk by 'getting your money off the table' through dividend-producing companies.

But remember, while dividends offer stability and returns, they're not without their tradeoffs. We'll uncover the complexities of managing dividend-paying companies and navigating potential risks. Tune in to learn how to strike the balance between steady returns and prudent risk management in your value investment journey.

Keep in mind the Rule #1 that’s the namesake of Phil’s company: “don’t lose money.” Click here for a deeper examination of that rule that’s helped so many value investors over the years: https://bit.ly/43jTNEr

Topics Discussed:

• Weather Matrix
• Ben Graham’s Margin of Safety
• RULERS
• Compound return
• Free cash flow (FCF)
• Maintenance capex

Resources Discussed:

• Berkshire Hathaway shareholder letter
• Email us your questions!

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"Invert, always invert" — Charlie Munger

To become a top-notch Rule #1 investor, having a well-defined investing strategy is essential. It starts with crafting a compelling narrative for the company you're eyeing and understanding why it's a stellar investment. But here's the twist: flip that narrative on its head and scrutinize the opposing viewpoint.

Challenge yourself to construct a case against the investment. If you can't, it's a sign that you might lack comprehensive knowledge about the company. When applying inversions to business acquisitions, consider formulating a robust inversion for every reason supporting the purchase.

Familiarize yourself with every argument against buying the company, surpassing even the short sellers' insights. Develop compelling rebuttals for each inversion, effectively nullifying them and proving the short sellers wrong!

Join Phil & Danielle in this throwback episode as they delve into the significance of inversion and highlight four essential aspects to contemplate when integrating it into your investing strategy. Click here for your copy of The Four Ms for Successful Investing: https://bit.ly/3LhVUAR

Topics Discussed:

• How to create a story
• Why you should always invert
• How to invert to own a business
• Four key points of inversions
• Relating to Chipotle and Gamestop

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In the practice of value investing, just like with so many other things in life, knowing when to wait patiently or when to jump ship is critical to the long-term success of your portfolio.

Being able to stomach market fluctuations isn’t something that everyone is capable of, but the mindset of buying into a business with long-term goals of generating cash flow means buying with the confidence that you’ll be able to weather the storms that may, and often do, come your way.

As the series on the Weather Matrix continues, Phil and Danielle discuss the importance of being in the “high understanding” quadrant of this tool as you consider potential investments and how that position makes it easier for you to decide what to buy and what to reject.

For a leg up on practices for generating consistent returns, click here for your free copy of How to Pick Stocks: The 5-Step Checklist: https://bit.ly/3ros8mU

Topics Discussed:

• The power of compounding
• Vanderbilts vs Rockefellers
• Owner earnings
• Investments vs speculation
• Inverting
• Durable competitive advantage
• Pitch decks

Resources Discussed:

• David Einhorn’s pitch decks

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Is there a limit to how much an investor should know about a potential investment? While it can seem like there’s an infinite amount of relevant considerations for any given business, the ability to discern the difference between important information and extraneous data is an indispensable tool in the investor’s kit.

If jumping into the deep end of the S&P 500 seems like a daunting proposition, keeping your investing practice focused on a smaller scale can make the process of understanding “the weather” a much more manageable task. Keeping the boundaries of your research close to the boundaries of your own circle of competence can go a long way in terms of keeping the process from being overwhelming.

This week we join Phil and Danielle in a continuation of this series discussing their idea of business meteorology, a topic that has utility for everyone from investing novices to the most seasoned of financial forecasters.

To get started on your own Weather Matrix, click here for your free copy of The 5 Moats Investment Guide: https://bit.ly/3Kmb33J

Topics Discussed:

• Investing circle of confidence
• Intimidation in the research process
• Buffett on taking advantage of the moment
• Spotting warning signs
• Netflix vs. other streamers

Resources Discussed:

• The Weather Matrix (value/understanding)

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Last week, the episode was centered around a tool for evaluating potential investments based on the myriad factors impacting their current performance and future trajectories, a topic that our hosts dubbed “the weather” of a business. While having a handle on a company’s worth and a clear gauge on one’s own understanding are both vital in making investment decisions, what other factors can—or should—influence the process?

The fundamental feeling of excitement or intrigue can be a divining rod in terms of pursuing investment opportunities, and though it can be easy to get caught up in the hype of compelling new prospect, it’s also important to remember that interest can be a powerful motivator when faced with a formidable research project.

Join Phil and Danielle as they venture further into the grid of their Weather Matrix, and learn how to find your own sweet spot when it comes to investing your time into researching investments.

For help in identifying opportunities and constructing your own Weather Matrix, click here for a free copy of 6 Market Crushing Investing Principles: https://bit.ly/45szJ2v

Topics Discussed:

• Buffett’s mistakes
• Buffett’s mistakes cont.
• The value of intrigue in investing
• Speed reading
• Toxic positivity
• Stoicism

Resources Discussed:

• The Weather Matrix (value/understanding)
• The Innovation Stack
• Seeking Alpha
• The Storyteller
• Man’s Search For Meaning
• Invested

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The 21st century has brought the world a number of revolutionary developments that have turned the world on its head, with one of the most important cultural shifts being the rise of the attention economy. With so many entities all vying for a piece of your time, how can you know when you’re spending too much of that limited resource on your investing research?

With decades of investing experience and a bit of basic mathematics, Phil explains a tool to classify companies into four groups based on their price/value ratio and the investor’s understanding of the business. If you find yourself getting bogged down or stuck in the weeds on your investing journey, this method could be the thing you need to streamline your research.

For more help calculating the ever-important metric of price vs value, get your free copy of Understanding Market Capitalizatin: https://bit.ly/44p1xE9

Topics Discussed:

• How much effort is too much effort?
• Accumulation of knowledge
• Price/value discrepancies
• Being prepared to “weather the storm”
• How to capitalize on market downturns
• Importance of repetition

Resources Discussed:

• The Weather matrix

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