Acknowledgments xiii
Introduction xvii
Chapter 1 Invest in the Business, Buy the Stock 1
Stock Prices are More Noise Than Information 4
A Businesslike Approach to Valuing the Business 6
The Making of a Legend 11
A Simple Idea, Really 14
Chapter 2 The Only Three Types of Investments You Need to Know 15
Stocks Prices arenât Always Rational 16
The Business Side of Investing 17
Three Buckets: Undervalued, Overvalued, and Fairly Valued 21
Price Determines Value 24
Key Takeaways 31
Chapter 3 The Six Elements of Intelligent Investing 33
All Investing is Value Investing 35
Learn from the Masters 38
The Sum of Its Parts: A Fundamental Framework 39
A Mental Latticework 42
Overview of the Six Elements 43
Emphasize the Process, Not the Outcome 46
Key Takeaways 46
Chapter 4 Establish a Sound Investment Philosophy The First Element 47
Preservation of Capital is the Name of the Game 49
Price Paid Determines Value Received 52
The Starting Point Matters 54
Avoid Using Margin 61
Focus on Absolute Returns 64
Key Takeaways 66
Chapter 5 Develop a Search Strategy The Second Element 67
Ignore the Media 69
Imitation is the Sincerest Form of Flattery 72
Basic Search Strategies 75
Advanced Search Strategy 85
Key Takeaways 89
Chapter 6 Effective Business Valuation The Third Element 91
Value Investing 101: Margin of Safety 92
Value Investing 201: Intrinsic Value 95
Value Investing 301: Seek Businesses with a Wide Moat 101
Value Investing 401: Calculating a True Intrinsic Value 106
The Value of Management 111
Understanding Return on Equity: Microsoft Corporation 121
Key Takeaways 124
Chapter 7 Have the Discipline to Say No The Fourth Element 125
In Investing, Discipline is Everything 126
Discipline Affects the Price Paid, Which Determines the Value You Get 128
Be Prepared to Look Stupid 132
Donât Split Hairs 137
Unveiling Investor A: Warren Buffett 139
Discipline is Simple but Rarely Easy 145
Key Takeaways 146
Chapter 8 Practicing the Art of Patience The Fifth Element 147
Swimming against the Current 150
The Benefits of Waiting for a Good Pitch 151
Ignorance Can Be Bliss 158
The Benefits of a Buy-and-Hold Approach 162
Conservative Tests of Safety a Must 171
Key Takeaways 172
Chapter 9 Invest Significantly at the Maximum Point of Pessimism The Sixth Element 173
Putting it All Together 174
Pessimism Leads to Value 179
Avoid That Which is Most Valuable 181
Remain Flexible in the Approach 186
All or Nothing 192
Key Takeaways 193
Chapter 10 More Than One Way to Find Value Case Studies Showing the Approach at Work 195
A Reminder: Process First, Outcome Second 197
Case Study #1: Finding Value in an Unloved Industry Sunrise Senior Living (SRZ) 198
Case Study #2: Money Machine South of the Border Ternium Steel 205
Case Study #3: A Tale of Two Shares Mueller Water Products 214
Fertile Hunting Ground 216
Conclusion 219
Key Takeaways 220
Chapter 11 Avoiding Common Stumbling Blocks 221
Growth and Value: Two Sides of the Same Coin 225
Book Value: More Than Meets the Eye 232
What Matters Most 240
Key Takeaways 242
Chapter 12 Starting an Investment Partnership 243
Two Key Considerations 244
Service Providers 245
Quality Matters Most 247
Notes 249
About the Author 253
Index 255
