Welcome! January 24 th, 2011

 How do we find these stocks to buy in the first place?  Stock of choice  Global Summer Program

 The one before the rest of society wants to buy that very same stock Find an “undervalued” stock –FA Stock whose price currently reflects a trend reversal – TA (more on this one another time)  Nearly 3,000 companies on NYSE alone Not counting NASDAQ/AMEX/OTC/Pinks/etc..  How do we navigate this mess?

 Pick a market that makes sense to you.  Many play the market on gut I’m not comfortable buying shares of a nuclear fusion business. Focus on sectors that you know and understand!  Cars, toothpaste, clothes, insurance

 For now we focus on fundamentals Financial Ratios  Profitability, Leverage, Solvency, Liquidity, Efficiency  Comparison to other companies in the same industry Valuation modeling  Is the company’s equity more than its market cap?  Basically, you are looking for stocks with real intrinsic value  We will delve into ratio analysis very soon

 By this we mean serious ones… not (necessarily) A/P  Stay away from stocks that are in the news because of large and looming lawsuits. Legal problems can drag on for years, so your best bet is to steer clear of companies that have these headaches.

 At the very least, make sure the majority of analysts are predicting stable or growth in earnings per share. ***Do not trust what a single analyst believes, but rather the majority. Still need to be defensive and take opinions with a grain of salt. The majority can still be wrong – i.e. housing bubble/bank fallout  Companies need to be profitable to stick around.

 Duh?  You want to pick a stock that is not popular today, yet could be popular tomorrow.  Stock that is being ignored by the market presently but has the future potential to pull out and up.

 marketsdata.html marketsdata.html    Browse around!

 The only surefire way to find a stock is to SEARCH  The process WILL take some time!  The more practice, the faster you will become You tend to know what you want

BRK-A BRK-B

 Arguably the most famous Value Investor  Age 79  Influenced by Benjamin Graham  Looks at the Underlying investment

 Sanborn Map  Value of their investment portfolio was $65 a share (Bonds, Etc.)  Was selling at $45  A profitable map making business essentially being valued at -$20 a share?  Took a board seat and paid a dividend of the investments and then left the map company behind to continue as it always had!

 Holding Company  Business Groups Insurance  Geico – 1995  General Re – Reinsurrance Manufacturing, Retail, Etc.  Fruit of the Loom – 2002  Benjamin Moore – 2000  The Pampered Chef – 2002  McLane – 2003

 Wesco Financial (80%)  ComdisCo Holding Co(38.2%)  Washington Post Co (20.46%)  USG (16.6%)  American Express (12.59%)  Moody’s (12.13%)  Coca-Cola (8.6%)  Wells Fargo (6.41%)

 Two Share Classes  A Shares (BRK-A) $124, Full Voting Rights Convertible to 1500 B Shares  B Shares (BRK-B) $ /10,000 th of Voting Rights of the A Share  Rather than 1/1,500 th of the vote Not Convertible

 Overall Gain Berkshire: 362,319% S & P 500: 4,276%  Compounded Annual Gain Berkshire: 20.3% S & P 500: 8.9%  2008 Berkshire: -9.6% S & P 500: -37%

 Warren Buffet is a model investor for many  I’m not necessarily saying go buy it now… but think about it  Will be giving full stock analysis in the future

 Price is what you pay. Value is what you get.  Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.  Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.  If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game.

 Next meeting Elaborate on researching  Soon want to open the floor up for you to give a stock presentation  We are getting in touch with employers and recruiters to come and speak.  GSP  Questions?