Well,
you can't get rid of one leg of a three legged stool and still have a good investment philosophy.
But, I would say that the most important thing
over a long period and working with big money
is to understand the business. I mean,
let's just say for the moment that you were
Given $1 million dollars or
whatever some was necessary
and you could look around Knoxville or look around all of Tennessee if you want.
And buy into any three businesses, you know, between now and a week from now
private businesses,
so they were not trading or anything of the sort
and you've got a week to do it or you have to give the money back.
Now, what will you be doing during the next week,
I mean, you can look at all these companies, some of them are quite familiar with,
Some of them are less familiar with some of, you know, by reputation,
some of, you know, the management, some of you don't,
you know, their competitive situation.
You know, what will you be thinking about during that seven day period?
How will you actually be screening these companies out?
I think you look, you're gonna be looking for businesses
that have enduring competitive advantage.
You know, you don't want to buy a Burger King franchise
just because nobody's come within 10 miles of it yet because,
you know Wendy's and McDonald's and all of those will be there.
I mean, it is necessarily who's earning the most money now.
You're going to look for something with enduring competitive advantage.
Now that takes a business with some kind of a moat around it.
Because capitalism, by definition
is a system where every time somebody has an economic castle,
somebody else is going to come after.
It's just the nature of it. If you open a restaurant that's successful here in town,
you know, somebody can take your menu and probably take your chef,
maybe cut your price, maybe offer a little more parking, maybe be a bit better okay, whatever.
I mean, capitalism consists of going after the other guys Castle,
Now, if that's the case, you want to castle with a big moat around it,
there's a lot of ways you can have a moat around on something,
you could have it by patent protection,
you could have it by location in certain certain areas.
I mean, if you own, if you have something in people's mind
like Coca-Cola, six billion people in the world,
practically all of them have something in their mind about Coca-Cola, largely favorable.
They're going to sell a lot of coca cola and it won't make any difference if somebody
is a half a cent less than some serving cokes.
So that's an enduring competitive advantage.
And you want it run by honest and able people.
You don't want to go in with a crook and you don't want to go in with a dope.
Now, the best businesses to buy, the ones where you could have a dope in there.
I mean, Peter Lynch says, you know, buy a business
that's so good that an idiot can run it because sooner or later one will, you know, and,
and there's some merit to that. Those are the kind of businesses to own so you want,
but you want a management that's able and honest
and then you want to price that's sensible, and that's what you look for.
You go around Tennessee got a week to do it
and you immediately screen out a whole bunch of things,
You just know that they weren't a fertile area,
and the that's an important thing to be able to do to just get rid of all kinds of things.
There was a great article in the New Yorker
30 years ago when Bobby Fischer was playing Spassky
and and the famous chess match, which drew attention around the world
and they examined, how the mind
could with billions and billions and billions of possibilities,
how it could group things. So it immediately cast it down to where you have like four options.
And of course when the humans play something like he thought,
you know, or whatever the latest version is that the computer on that
That computer is making maybe 700,000 or a million calculations a second.
And the human mind is competing against that.
But the computer is checking every possibility
and the human mind somehow has this ability to cast out
99.999% of those things that the computer has to go through
in order to focus on the three or four possibilities that really makes sense
and investing is a lot like that. It's not that tough because there aren't that many companies,
but you want to cast out all kinds of things.
If somebody told me that my life depended on picking among the Dow Jones stocks,
A group of 10, that would be the best performers
or outperformed the index as a whole.
I would spend my time thinking of the worst up companies in there.
I would cast out things and then I would figure I left those behind.
And I would I would that's an easier way to approach the problem
Actually than trying to pick the 10 best.
So you would have to, if you were thinking about the state of Tennessee,
you know, there's a whole lot of things you wouldn't examine,
you just figure they're too tough, you might decide,
you know, car dealerships were too tough.
It's always going to be competitive. Who knows whether Ford or
General Motors are gonna be selling more cars five years from now,
or whether they're gonna be tariffs on foreign cars, who knows?
So you just say, I'll give up on car dealerships.
That approach, that you use there is the same approach.
You really want to bring to stock market,
you've got 3000 companies tonight you can look at, on the New York Stock Exchange,
you don't have to play once a year if you have 20 good,
if you have five good ideas in your lifetime you get very rich.
Third thing in Graham's book is the margin of safety.
If you come up to a bridge and it says "Capacity 10,000 pounds,"
and you're driving a 9800 pounds truck, you drive down further and find another bridge.
I mean, you know they, nobody knows exactly what that capacity is and it may have been signed,
may have been put up three years ago.
So you always leave a margin of safety.
You don't, you don't try to cut things back close.
You wait till something kind of shouts at you in the stock market.
If I got an idea about looking up a company
And I get the 10Ks and so on,
I would rather not know the price because I'd rather value it without knowing the price.
A stock is part of a business.
You value a business and then you divide by the shares outstanding.
But what you have to think about is what kind of a business or you're getting into?
What its economic characteristics for its competitors?
What management like?
All of these things that relate to a business instead of a little ticker symbol
and you can build all kinds of, all kinds of structures on that.
But that's the foundation. And if you've got that in mind and that's the intelligent investor,
I've never found anything that remotely compares with.