Lesson 1

What is Value Investing

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Executive Summary


Warren Buffett is a Bloomberg game changer. During the terrifying moment in US financial history when most of the banks and businesses were about to fail where most of the world's economy depends, he was the person to call who can save the economy. He did this by making investments instead of Wall Street speculations.


Buffett's father won at the congress, so they moved to Washington from Omaha in 1943. His new business was to deliver newspapers of Washington Post. He was ready to go full time as a businessman and investor when his father instructed him to finish college first. He studied at Columbia's business school where Ben Graham was teaching. After learning from Graham, he headed back to Omaha and started his own partnership. He convinced the first 7 investors even though he looked 16 at age 20. Later on, he turned to Carnegie to get rid of his fear of public speaking. In the 1859s, Buffett bought a textile company that was about to go out of business - Berkshire Hathaway. Berkshire was not a competitive business. In fact, they lost money. Buffett did not stop there. He bought bargains like See's Candies and blue chip stocks, which delivered in interest cash that can be used for future businesses. At age 30 in the 1970s, he reached the billionaire status that he dreamed of when he was a kid. In 1972, Berkshire stock price hit $93 bought by the insurance businesses alongside other businesses. His investment in Omaha Weekly even increased the stock price more. He also invested in The Sun. After awhile, Buffett invested in Buffalo Evening News at $33M as his largest investment yet. They didn't have a Sunday edition, and he knew having a Sunday edition would stir the product stronger.


After multiplying his wealth, Buffett pledged the bulk of his fortune not to his kids, but to the charity of Bill and Melinda Gates. Bill gates is a great friend of Buffett ever since. Plus, the couple is young and energetic, and would do whatever Buffett wants to do that he can't do anymore.


Buffett is a great American who brought America as a great country. He touched lives. He is the world's greatest investor.

Full Transcript


Born in the early 1900s, Warren Buffett was the richest man in the world about 70 years later.


How did he attain such wealth? It's simple. Buffett always aims to be the best in whatever he does. Despite his success, there were setbacks, but he learned from it.


Buffett is a Bloomberg game changer. During the terrifying moment in US financial history when most of the banks and businesses were about to fail where most of the world's economy depends, he was the person to call who can save the economy. He did this by making investments instead of Wall Street speculations.


Buffett likes numbers, which probably made it easier for him to analyze businesses, which eventually became the bedrock of his success.


Contrary to what most people might think, Buffett's childhood was not lavish, because his father lost money as a stockbroker. He took action and bought Cokes from his grandfather's grocery store to resold them.


Buffett's father won at the congress, so they moved to Washington in 1943. Buffett's new business was to deliver newspapers of Washington Post. As expected, there was great outcome. His savings became the seed to his empire.


Buffett was ready to go full time as a businessman and investor when his father instructed him to finish college first. He was better than his professors in Pennsylvania, so he left and applied at Harvard only to get rejected because of age.


He then studied at Columbia's business school where Ben Graham was teaching. Graham's philosophy was simple, but it defied the fundamentals. "Sometimes the market is very wrong," Graham would say, "If you look at stocks as buying pieces of businesses, you're seeing them wrong."


After learning from Graham, Buffett headed back to Omaha to start his partnership. He convinced the first 7 investors even though he looked 16 at age 20. He would just throw all stocks and figures, and then someone would tell him what his father would think.


He turned to Carnegie to study public speaking, because he feared it. After that, he applied the lessons in speech when he proposed to his late wife, Susie Thompson.


Unlike most investors, he was picking stocks that other people ignored. Little by little, it spread in Omaha. His balance sheets are amazing and impressive. The Dow rose 74% in the first 4 years of Buffett in business.


At age 30 in the 1970s, he reached the billionaire status that he dreamed of when he was a kid. He was still operating as a one-man band and still working at home. Susie's stabilized his family, so Buffett could manage the business.


As Buffett moved away from his father's politics life, the biggest change happened in his professional life. In his 30s, he wanted to buy one where he has a controlling interest, which he found one in Nebraska. the stock was not well at that time, but the price was so cheap - Dempster Mills. He learned that he needed to buy businesses that are strong enough and hire managers who are trustworthy.


Buffett bought a textiles company that was about to go out of business - Berkshire Hathaway. Berkshire was not a competitive business. In fact, they lost money. The first successful investment of Berkshire was insurance. Ever since, Berkshire trended things around. Money comes in interest fee from interest premiums which then gets invested in other businesses. Even though the textile business died in the near future, he kept the name.


Buffett did not stop at Berkshire. He bought bargains like See's Candies and blue chip stocks, which delivered in interest cash that can be used for future businesses. He then found Charlie Munger as a lawyer when they first met. Munger introduced himself as a man who used to worked at Buffett's grandfather's grocery store.


Buffett and Munger immediately became friends and talked about business. However, it took 3 years for Munger before he realized Buffett would make a great business partner.


After the partnership, Buffett was restless and made a fateful decision to buy Wesco, which was in a deal with another company. They compared Buffett to bust the merger that eventually bought a problem. There was a complex spider web of ownership. Buffett and Munger didn't do anything improper, but they didn't know all the necessary rules.


Buffett was offering Wesco a higher price for their stock than the stock market was offering. They thought it was the right way to behave. However, they learned that it is improper to manipulate the stocks and cause that the market price to increase. That was the first challenge in Buffett's reputation. It threatened his career.


After the incident, Buffett became more stricter and more proper in his behaviors and more worried about is reputation.


In 1972, Berkshire stock price hit $93 bought by the insurance businesses alongside other businesses. His investment in Omaha Weekly even increased the stock price more. He also invested in The Sun. Stan Lipsey was the publisher whom he sat with to brainstorm how to make money. One day, Buffett decided to weight about the Boys Town. He knew that charities like Boys Town need to enclose their income. That led to the headline with hundreds of boys with hundreds of thousands of dollars as the richest charity ever. The newspaper garnered an award that it never got before.


After a while, Buffett invested in Buffalo Evening News at $33M as his largest investment yet. They didn't have a Sunday edition, and he knew having a Sunday edition would stir the product stronger. If not, the product would die. Advertisers began deserting it, but Buffett didn't back out! They knew one paper would win and one paper will lose. Buffett's competition soon went out of business and Buffalo Evening News became profitable.


In 1985, Berkshire was $2000 a share. It was history!


Not long after, Buffett invested in Solomon, which surprised people. If he had the chance to make money big enough, some of the concepts are put side. However, problems rose after his investment. In 1991, there were illegal moves by the Solomon traders in the bond market. Buffett was the vice chairman, and he wasn't part of the illegal move, but he was worried about it and he got dragged. After finding out about the problem, the Solomon Brothers did not report to the authorities.


it was one of the worst days of his life. it was reported that the CEO would resign. They were decapitated, but the CEO made one last desperate attempt. He called to Omaha to Buffett for help, because he was the only person who could fit in the position. It takes a life time to build a reputation, and only 5 minutes to lose it. Buffet was worried that Solomon was his 5 minutes. The company was in a state of panic when Buffett arrived in NY. but he saved the company!


1999 and 2000 was the greatest turn around of Berkshire. They bought Dairy Queen, the Nebraska furniture, Omaha World Herald, and Burlington Northern Railroad. Railroads become a hot thing that no one ever noticed before.


After multiplying his wealth, Buffett pledged the bulk of his fortune not to his kids, but to the charity of Bill and Melinda Gates. Bill gates is a great friend of Buffett ever since. Plus, the couple is young and energetic, and would do whatever Buffett wants to do that he can't do anymore.


In 2007, a single share of Berkshire hit $150,000. After a year, USA's economy was down; financial institutions collapsed in huge amount of debts; terrified bankers in NY was in need of enormous help from whoever has the capability. People trusted Buffett at this time of the year. Goldman Sachs, General Motors, and Bank of America are some of Buffett's newest investments.


Buffett was awarded the medal of freedom in 2011. However, also in 2011, the man seen as his successor, David Sokol, was caught in a scandal as he was buying stocks for himself from a company called Lubrizol - Berkshire's acquisition. It was not something that should have been held back. David left the company and the issue stopped.


Buffett is a great American who brought America as a great country. He touched lives. He is the world's greatest investor.