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InvestED: The Rule #1 Investing Podcast
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InvestED: The Rule #1 Investing Podcast

Author: Phil Town & Danielle Town

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Phil Town is a hedge fund manager and author of 3 New York Times best-selling investment books, Invested, Rule #1, and Payback Time. On the InvestED podcast, Phil and his daughter Danielle shine a light on the successful investing strategies that gurus like Warren Buffett have used for 80 years. Listen in for a great stock market education on basics, learn how to invest on your own, and follow along with real-time examples and investing tips from week to week. Subscribe and leave a review. Questions? Email questions@investedpodcast.com.
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Have you ever cloned another investor? As the name implies, cloning refers to the strategy of following or copying the ideas of famous investors or fund managers. Most investors believe this is an ethical strategy, and Rule #1 investors actually take advantage of the fact that we can clone or follow expert investors.  This idea of cloning goes all the way back to when Warren Buffett first started watching Ben Graham’s investing strategies, and other investing gurus openly stating that they cloned other great investors that came before them. Mohnish Pabrai, for instance, is one of the more successful investors out there. He is a shameless cloner and follower of Warren Buffett and Charlie Munger. In fact, Pabrai once famously stated that “Thou shall be a shameless cloner.”  Although, the best investors in the world know that cloning is only an efficient strategy when you do your own research on top of that. But what tools will help you successfully clone experts? One of the most popular tools which I discuss today is Dataroma, to track stock picks and portfolios of legendary value investors such as Warren Buffett. The data is consolidated, categorized and presented in an easily accessible format. What you should look out for while analyzing investors in these tools is how many stocks they own. If an investor owns less than 20 companies, for example, they’re almost certainly a Rule #1-style investor. Only clone investors with this characteristic—investors who stick to a few stocks and are passionate about those companies. Because this means they’re putting in 5% of their portfolio on average into one business, which is a scary thought for the vast majority of people who manage money. They don’t want to get committed to anything because they don’t have that level of certainty, and they’re not doing that kind of research.  This week, I discuss these tools and the process of cloning in-depth, and discuss why this could be an effective strategy if done correctly.  Learn more about finding quality stocks to invest in with my Four Ms for Successful Investing Guide. Click here to download: https://bit.ly/39fTzUK Learn more about your ad choices. Visit megaphone.fm/adchoices
This has been an emotionally exhausting year for everyone, and you’ve probably been affected in one way or another. Gratitude can be a powerful tool for resilience in the face of adversity, so this week we’re practicing being thankful before the upcoming Thanksgiving holiday. We are incredibly grateful for all of our listeners and hope you enjoy thinking about investing from a different perspective this week. Years ago, I spent some time in Japan with a good friend of mine named Wahei Takeda. He’s known as the Warren Buffett of Japan, who made his entire fortune from scratch in post WWII Japan.  Wahei told me that the most important thing that you can do every day, the thing that was responsible for him making billions of dollars, is “Be thankful 1,000 times a day.” This hit home, as I felt like I’ve been doing it my whole life, but I’ve never heard anyone put it into a formula for making money and using it as a guide to investing. Wahei calls it, “Maro Up.” “Maro” means being thankful. When Wahei buys a company, he goes to the CEO and tells them that he wants them to learn the technique of being thankful. This idea of being thankful must be really basic and fundamental to some kind of law of nature. So this week, I challenge you to be aware and thankful as much as you can. Put yourself in that psychological position of gratitude. Be thankful for your investing knowledge, and all it has given you in your life. Be thankful for your computer that allowed you to learn, and your ability to read so you could consume life-changing information. There’s something about it that’s so powerful! It turned Wahei, who was poor, struggling in a country that had been devastated, into a billionaire. If it worked for him, we should try it too. Get inspired to invest like the world's greatest investors with this free guide. Click here to download: https://bit.ly/3f82b0x Learn more about your ad choices. Visit megaphone.fm/adchoices
Phil predicts a devaluation of the buying power of the US dollar. Therefore, there may be problems on the horizon for investors. Inflation is a natural result of currency fluctuations, because it will cost more to purchase goods and services. In some markets, inflation destroyed the stock market for 20 years! For instance, when there was a high rate of inflation in the United States from 1965-1983, the rate of return was nearly 0%. If Phil’s predictions are true, there will be a major problem for investors with diversified portfolios, because your buying power will be dwindled down nearly in half. Diversification is the idea of creating a portfolio that includes multiple investments in order to reduce risk. Someone who is an entrepreneur might think it is best to lower his or her risk and have 100 businesses, rather than focus on one or two. Most people over-diversify. They split their money into hundreds of stocks in hopes of making a great return. This is not the best strategy, because your rate of return is going to be widely dependent on whatever fluctuations the market is experiencing. If you know how to invest, you don’t have to diversify.  But on the other hand, investors who own fewer companies will be in better shape. Warren Buffett is a perfect example of this! He made billions of dollars in the 1970s—in fact, it was his best era for investing. The reason for this is because as the market started to realize that there were serious structural problems with currency, it became extremely volatile. The market went from 1000 on the Dow Jones peak in 1965, down 30-50% about 10-15 times in the next 15 years. Rule #1 investors thrive in this kind of market environment. This is why it’s so important to understand when and why businesses go on sale, per the Rule #1 investing principles. Focus your portfolio on businesses you understand, that you know you are buying cheap, and let the diversification happen naturally. It’s worse to be in things you don’t understand than to be un-diversified in industries you do understand. If you’re doing your work well, you shouldn’t have an industry-wide permanent bad surprise. The number of stocks I own, and thus my diversification, such as it is, will ebb and flow as I find great businesses to buy. Phil also believes that as a result of this election, there will be dramatic changes in fiscal policies and in tariffs with China. All of these side effects will create a lot of short-term volatility. Even just a few days after the election, the market immediately jumped up, and has just recently leveled out. It’s hard to tell what will come next. On today’s podcast, Phil predicts what may happen next in the market and why all you can do as a rational Rule #1 investor is rely on the knowledge you’re equipped with.  Prepare yourself for whatever may happen in the stock market. Download my Stock Market Crash Survival Guide today: https://bit.ly/3eNtFZ6 Learn more about your ad choices. Visit megaphone.fm/adchoices
What's going to happen in the next few months following the election? Nobody knows for sure, but there will likely be some turbulence ahead.  If you’ve been following along with my channels for some time, you know the best method to make long term gains in the market. You have to do the research and buy companies that fit the Rule #1 criteria and are “on sale.”  So how come everyone doesn't just do it? It could be because they’re busy adjusting to the pandemic, stressed out, or dealing with other external factors.  Now more than ever, you need to take care of your mind and body so you can avoid making costly investing decisions and, more importantly, stay healthy.  When you get overwhelmed by stress or fear, your rational mind loses power, and your emotions take over. Being able to control your emotions is an essential part of being a successful investor. And being able to control your emotions depends on how well you take care of yourself day-to-day. If you let anxiety, stress, or fear drive your decisions, you will end up making completely irrational choices that could hurt you in the long run.  Instead, you want to train yourself to observe those negative feelings and learn how to deal with them. Constantly falling victim to them will only send you into a downward emotional spiral that might lead you to make bad investment decisions. Always fall back on the investing knowledge you have and let your rational mind take over.  Rational investors have the ability to recognize when they’re feeling a bit unbalanced - and then walking away. They come back to it when they have a clear head so they don’t make a rash decision based on emotions.  Whether it’s practicing staying mindful, reading, working out, or meditating, try to incorporate some form of practice into your life that will enable you to keep a clear head during stressful times. It will be a big help in developing your ability to control your emotions.  Prepare yourself for whatever may happen in the stock market! Download my Stock Market Crash Survival Guide today: https://bit.ly/2TPpbYt Learn more about your ad choices. Visit megaphone.fm/adchoices
Danielle is back for this week’s episode of InvestED. After almost seven weeks into recovery since first experiencing symptoms from COVID-19, she starts to reintroduce routine activity into her daily life and discusses both the physical and economic consequences of COVID-19 with Phil. Numbers have spiked in Europe in the past week and a half and there are theories as to why. Why have rates in some countries spiked, while others have been able to keep their number of cases down - and what does this have to do with investing? Phil and Danielle agree that the virus is very political in the United States, especially with the presidential election on the horizon. There is no doubt that if the pandemic continues the way it has, we will see some very serious currency related issues and possibly dramatic inflation. Businesses such as theatres, sporting events, and restaurants are already on life-support, and the long term effects of people continuing to stay home from work and businesses will lead to many businesses going under. Phil and Danielle agree that another stimulus package will be pushed through very soon, but the question remains as to what will happen with the currency; how much can you print and put into the economy, and how will this affect the US dollar (USD) itself? On top of this, the USD is the world’s reserve currency. If the USD goes down in value, it will injure any other country who has the dollar sitting in its vaults. So what should we as investors invest in, and how should we diversify our investments to protect ourselves from economic crash or inflation? If you want to prepare for the next market crash, download Phil’s Stock Market Crash Survival Guide today: https://bit.ly/3m3J7mt Learn more about your ad choices. Visit megaphone.fm/adchoices
A stock split is when a company decides to exchange more shares at a lower price for stockholders' existing shares. They happen from time to time, so it's important for us as investors to understand what that means. Stock splits make stocks more accessible to individual shareholders, make selling put options cheaper, and typically tends to increase share prices in the short run. So does a stock split impact your investment if you already own the stock? It shouldn’t, because your investment should be the value of the entire business no matter how many pieces it is split into.    There's another kind of stock split which is called a reverse stock split, where you end up with less shares than you previously started with. For instance, let's say you had 100 shares and they reverse split it 10 to 1, you suddenly have 10 shares. Does it increase the value or decrease the value? Not at all.    Rule #1 investors look at the company not per share. They look at it as a whole company the way an owner does. This is why the company evaluation process is a critical step in investing—if not the most important.    The company evaluation process includes confirming that the business has a margin of safety. Margin of Safety is the discount rate you can buy a wonderful business, which is generally 50% off the Sticker Price. Because the Margin of Safety is just 50% of the Sticker Price, it allows you the ability to purchase into the business with lower risk. Setting this limitation on the price of a business before you buy it helps protect you by providing an extra 50% cushion off the value of the company. Since you must do a lot of research before buying a business, it should always be something you’re confident in purchasing. However, anything can happen in the stock market, and it makes sense to allot yourself an extra measure of protection. Buying at 50% off does just that. Another way to evaluate a company is by evaluating the business’s moat. Moat is the durable competitive advantage that a company has that protects it from being attacked by competitors. Moat is what makes a company predictable and allows us to put a value on the business. Charlie Munger said that “Coca-Cola is the perfect business because it has this gigantic durable competitive advantage, or moat, which gives it predictable cash flow.” This allows us to figure out what the future cash flow will be and value the company today, so we know whether we can buy it on sale or not. Today, Phil answers fan questions regarding stock splits, company valuation, and explains why it’s important to do your research and due diligence before committing to any companies on your watchlist.  If you want to learn more about how to find excellent companies at attractive prices, download Phil’s Four Ms for Successful Investing Checklist: https://bit.ly/3jV5QAn Learn more about your ad choices. Visit megaphone.fm/adchoices
If you think that because real estate lets you leverage your investment, the rate of return is much higher than a business/stock investment, and is, therefore a better place for beginner investors to put their money, think again. This is a commonly held idea that is completely mistaken.  Phil and other expert investors including Warren Buffett have owned real estate, everything from subdivisions to large farms, apartments, commercial property, and single-family homes. If you were to do a real estate versus business/stock ownership returns comparison, we could pit the hottest real estate markets against the hottest Rule #1 investors. But it seems better to use the average real estate market and the average Rule #1 investor. As Rule #1 investors, we incur almost no management responsibility—a significant advantage. We have to spend about 15 minutes a week reading and researching, and that’s it. We’re required to know the basics of Rule #1 investing, but it’s easier to learn than real estate investing once you know the advantages.  Let’s say a Rule #1 investor had $50,000 to invest. They could buy a wonderful business at an attractive price, and when it gets unattractive, sell and buy another. We do that for 30 years, averaging 15%. After 30 years, the investment would be worth $3.3 million. Now compare that to a real estate investment. Say the average person buys a $250,000 house for $50,000 down with a 6%, 30-year fixed mortgage. Their payments are $1,200 a month, but they rent it for $1,200 and cover the mortgage payments. They’re in the hole for insurance, maintenance, advertising, and taxes. Their only choice would be to re-leverage their investment and buy more real estate—which is a whole lot different than being retired, isn’t it? Now that you're starting to think about what assets you want to invest in, make sure you understand the distinguishing characteristics to look for when buying a piece of a company. Does the business have honest management, a large moat, margin of safety, and meaning to you? Research those companies more deeply to determine which abide by Rule #1 principles. If their numbers look good, these are companies you want to add to your watchlist. Today, Danielle and Phil discuss whether or not it’s possible to make real estate a beneficial component of a high-performing financial portfolio. Learn more about buying stocks within your circle of competence with this 3 Circles Exercise Guide! Click here to download: https://bit.ly/2F9rn9C Learn more about your ad choices. Visit megaphone.fm/adchoices
Allan Mecham is a well-known investor who runs a hedge fund called Arlington Value Capital. Allan has had a phenomenal track record, and implements the values and philosophies of Rule #1 investing. In 2012, Allan sent out a letter to his investors that covered some of his core investing philosophies. One of those philosophies included that in order to be successful in the stock market, you must look for the rare combination of business safety, an attractive price, and a clear understanding of the business that leads to a low-risk and market-meeting return. His principles also focus on the idea that you’re not trying to make money in investing, but the objective is to not lose money. This doesn’t mean the stock price never goes down from where you bought it, but rather, the value of the business never decreases from where you bought it. Determining whether or not a business’s value will decrease comes down to finding a safe company at a great price, and making sure you understand it fully. This is one of the core Rule #1 investing principles.  In Allan’s letter, he also stated that he has one goal in mind when structuring his policies. That is, to make rational decisions in investing which will lead to wonderful returns. This includes staying within your circle of competence and thinking objectively. The most important thing I can tell you about becoming a great investor is to focus on your circle of competence. Try to buy businesses that really mean something to you. What are you passionate about? What do you actually know something about? Those are the questions that will make you connect to your investments, and the more you connect with your investments, the more you will own it as if you own the whole business. The more you understand the meaning of the business, the better investor you are going to be. What Allan means by staying objective in investing is not being influenced by your emotions, and sticking to the data and facts in your researching process. Only buy into a company with the mindset that you are owning the business as if it were your own—and that you plan to own that company for the long-term. This is also aligned with Rule #1 investing philosophies. In today’s podcast, Phil dives deeper into Allan Mecham’s investing philosophies, and discusses what investors can learn from them.  Learn more about buying stocks within your circle of competence with my 3 Circles Exercise Guide! Click here to download: https://bit.ly/3ieOJbp Learn more about your ad choices. Visit megaphone.fm/adchoices
Warren Buffett says that the ideal investment is one that you can hold onto forever, growing your money for as long as you own it. However, Buffett and every other successful investor also knows that there are times when selling a stock is the best route. For example, Phil Town was a big fan of IBM and bought into the company in his earlier investing years. He researched IBM thoroughly, and felt that he understood the business as if it were his own. A few years later, IBM got a new CEO named Ginni Rometty. Phil believed that she was trying to change the direction of the company, and she did not have a proven track record of success in the technology field. This was a big red flag to Phil. It was clear that IBM wasn’t making the transition to a new CEO smoothly, so Phil tried to offset IBM’s drops in the market by buying in on put options and selling on call options. This did not generate returns like he hoped it would.  Interestingly enough, while all of this was happening, IBM sustained a big Moat—which they still have today. This is a great indicator of how hard it is to break a big Moat, even when the company is seemingly doing everything wrong. But it takes much more than Moat to make a great company. Ultimately, Phil ended up exiting his position with IBM, but was still able to profit off of it. This is the importance of buying companies with a Margin of Safety.   So, the question is: when IS it the right time to sell a stock? If you’ve done your homework and you’ve bought a great company at an attractive price...why sell it? You don’t want to regret the feeling that you sold something too late or too soon. You should sell a stock when the fundamentals of the company have changed. All companies change over time—sometimes for the better and sometimes for the worse. New management sometimes takes over, new competition comes onto the market, and, sometimes, the entire story of the company itself may change. If the company you now own is no longer the same company that you first invested in and you no longer have faith in its new direction, it's a good time to sell your stock. Second, you should sell a stock when the price of the company has reached its intrinsic value. As Rule #1 investors, we try to purchase companies at a discount to their true value. Thankfully, various events in the market can often drive the price of a company down below its true value, creating a great buying opportunity. Last, it’s a good idea to exit your position in a company when you simply have a better opportunity. While it's always ideal to have cash set aside for use in case a great investment opportunity comes up, there may be times when you want to invest more than you have available in cash. In these situations, it's perfectly okay to sell a stock in order to free up capital. In today’s podcast, Phil and Danielle talk about the changes in IBM that drove Phil’s decision to exit his position, and what investors can learn from them.  Don’t buy a risky stock. Download this ultimate to-do list for investors looking to buy wonderful businesses with low risk and high returns: https://bit.ly/2RwNp8S Learn more about your ad choices. Visit megaphone.fm/adchoices
Investing is one of the most morally charged and important things we can do. If we’re privileged enough to be among the few who have more money than is necessary to survive, we must be careful about how we allocate that excess capital. Ultimately, it could determine how the world works for our family for generations to come. So as you’re building your watchlist, keep in mind that you are buying businesses, NOT stocks. For instance, although the marijuana industry is starting to grow, you would still have to ask yourself if it fits within your values if you were considering investing in a marijuana production company. Are you proud to own the business as if it were your own? These are all things you have to ask yourself while analyzing companies in any industry. You also must consider the predictability of a company in the marijuana industry, since they are typically younger and therefore carry more risk. In these cases, there is typically less public information about those companies, making it harder to perform a proper analysis in your initial researching phase of investing.  The essence of Rule #1 is “don’t lose money,” but what that means in practical terms is to invest with certainty. Certainty comes from this: buying wonderful businesses at attractive prices. In Rule #1 investing, the word ‘wonderful’ actually encompasses four simple elements, which we call the Four Ms.  First, the company must have Meaning to you. This refers to understanding the industry, and if the industry has meaning to you, then you understand the environment in which the business competes. The next M is Moat, which refers to the durability of the business—or the competitive advantage a company has over other companies in the same industry. Just as Moat protects a castle from attack, a durable competitive advantage protects a company.  The third M is Management. Rule #1 investors only support businesses that have a CEO who is service-oriented, passionate about their business, honest, and experienced. While you can make money from a business with just Meaning and Moat, when you add in good Management, you’re less likely to suffer through a period when a traitor is running the show poorly and costing you money. Finally, the last of the Four Ms is Margin of Safety (MOS). MOS is essentially a large discount on the sticker price or intrinsic value—typically around 50% off. Understanding how to determine a company’s true value is so critical to stockpiling. Investors have gotten very rich buying companies, but unless they were very lucky, they only got rich because they knew the value of those businesses first. That’s why today, Phil and Danielle answer fan questions regarding business analysis, and discuss why it’s important to invest in companies that reflect your personal values.  If you want to learn more about analyzing companies on your watchlist, download Phil’s Four Ms for Successful Investing Checklist: https://bit.ly/2FJNAuw Learn more about your ad choices. Visit megaphone.fm/adchoices
One of the core Rule #1 investing principles is to buy wonderful companies at attractive prices. This helps take the risk out of investing and makes it easier to get fantastic returns. However, there are other factors that you must consider before you commit to any companies on your watchlist. A great company encompasses four simple elements, and we call these elements the “Four Ms of Investing.” First, the company must have Meaning to you. This means you understand the business as if it were your own, you’re proud to own the business, and the business reflects your values. Meaning is often the factor that differentiates between truly investing in a company with confidence and simply gambling on whether or not they will grow in value. Next, the business must meet certain criteria in terms of financial strength and predictability. This is considered Moat. The business needs to have something that prevents their competition from coming in and stealing away the control they have over their market. By investing in a company with a Moat, you can ensure that you don’t lose your investment due to that company being watered down by competition. The third factor is Management, because every company is only as good as the people who are leading it! Far too often, companies are sunk due to dishonest or poor management. This is why it’s important to take your time to research the people who are leading a company, and make sure they have a track record of integrity, as well as success. Last, the business must have a large Margin of Safety (MOS). MOS essentially means you can buy a dollar of value for fifty cents. If you know what a business is worth, you must be able to buy it at a cheaper price. This will lead to high returns, and can eventually make you very rich. There are also red flags to consider when analyzing companies. For example, you should always be wary of CEOs that are selling off their shares of the company. This is tied to insider trading, or the trading of a public company's stock based on nonpublic information about the company.  When people hear “insider trading,” they probably think of situations like Martha Stewart going to jail for this practice. But, what a lot of people don’t realize is that insider trading is essentially legal if the CEO in question notifies the SEC that they’re doing it within 48 hours of the sale. Do you understand the company and why their mission is important? Does it have a genuine, tangible competitive advantage? Is it run by good people? Is it on sale? By getting the answers to these critical questions, you’ll know whether or not you should invest in this company. Today, Phil and Danielle answer fan questions regarding company valuation, and explain why it’s important to do your research and due diligence before committing to any companies on your watchlist.  If you want to learn more about analyzing companies, download Phil’s Four Ms for Successful Investing Checklist: https://bit.ly/32aNNQz Learn more about your ad choices. Visit megaphone.fm/adchoices
Invest in what you understand. Sounds simple, right? Shouldn’t everyone be investing in what they understand? Warren Buffett once stated that defining your circle of competence is the most important aspect of investing.  Circle of competence is tricky to define, but is essentially built by the things you are passionate about, what you’re talented or good at, and things you spend money on. It could even be related to the industry you currently work in and are knowledgeable about. The goal is to be proud of the companies you own, and how your money is being used to support those businesses. In many ways, defining your circle of competence comes naturally. However, as you live your life, your interests will change and expand, and you can apply these new interests to your investing strategy. Take Warren Buffett for example. Much of the reason why he invested in Coca Cola is simply because he appreciates the company and enjoys the product. It aligns with his values, thus making it a great fit within his circle of competence.  Let me give you another example. I’m a fan of motorcycles, so researching and investing in Harley Davidson was a natural choice for me. Since Harley Davidson is a company that is within my circle of competence, I enjoyed learning about them, I understand their business more easily, and am happy to have owned the company. Investing in your circle of confidence will help you reduce risk and makes your initial stages of research much more enjoyable. Although, it’s an often overlooked factor since many investors feel that they can make money with any company—regardless of whether they understand it or whether it aligns with their values.  Today, Phil and Danielle dive deeper into the concept of circle of competence, and why it is a critical part of successful investing. If you want to learn more about your own circle of competence, download my FREE 3 Circles Exercise Guide. It will help point you in the right direction so you can invest in businesses you understand!: https://bit.ly/3luGI4V Learn more about your ad choices. Visit megaphone.fm/adchoices
In Rule #1 investing, we call “buying on sale” purchasing stocks with a Margin of Safety. All you have to do to get a big MOS is know the value of the business you are buying—as a business—and then wait to buy it until the market drops much lower than the value. Today, Phil and Danielle dive deeper into Margin of Safety valuations, and explain why understanding how to value a company is critical to stockpiling.  For show notes and more information, visit www.investedpodcast.com. Learn more about your ad choices. Visit megaphone.fm/adchoices
279- Payback Time

279- Payback Time

2020-08-1842:242

A powerful way to arrive at the margin of safety price is the “How long before I get my money back” method—aka Payback Time. If you buy the whole business and pocket all the earnings, Payback Time is the time it would take you to get your investment back. Once you get all of your money out of the business, you have no risk. Today, Phil and Danielle discuss this concept in depth, and explain why knowing Payback Time eliminates many fears of investing. For show notes and more information, visit www.investedpodcast.com. Learn more about your ad choices. Visit megaphone.fm/adchoices
You’ve done the initial Four Ms analysis of companies on your watchlist, but your work is not complete. The next step in the researching process is critical, and tells you whether or not the business is worth purchasing. Being at this point in your analysis means that you’re highly confident that the company is going to be larger and more productive in ten years. Today, Phil and Danielle discuss this next step in the research process, and cover how to calculate margin of safety using the ten cap valuation process.  For show notes and more information, visit www.investedpodcast.com. Learn more about your ad choices. Visit megaphone.fm/adchoices
In the researching phase of investing, it’s important to understand who the major players are and who else owns shares of the companies on your watchlist. However, insider disclosure rules are changing and will change the way this information is presented to the public. In today’s episode of InvestED, Phil and Danielle discuss factors that indicate large investors stepping in to purchase stocks, and the reasons why small investors have an advantage. For show notes and more information, visit www.investedpodcast.com. Learn more about your ad choices. Visit megaphone.fm/adchoices
Management is one of the key factors to consider when looking for companies to purchase, and that involves analyzing the CEO’s compensation. You must understand how management gets compensated, and know that they are getting paid for building a better company—not for having a better stock price. This week on InvestED, Phil and Danielle discuss why it’s important for CEOs to get compensated for having low debt, high free cash flow, high owner earnings, and expanding the moat to protect against competition.  For show notes and more information, visit www.investedpodcast.com. Learn more about your ad choices. Visit megaphone.fm/adchoices
Bill Ackman’s checklist is straightforward and reflects the basic principles of Rule #1 investing. But sometimes a company’s story has changed, so you must research further to determine if you need to hedge, or even exit a position. This week on InvestED, Phil and Danielle discuss Ackman’s checklist more in-depth, and explain why keeping things simple is ultimately the best route to go in an investing situation. For show notes and more information, visit www.investedpodcast.com. Learn more about your ad choices. Visit megaphone.fm/adchoices
Bill Ackman is a successful investor who we can learn from. Although his checklist slightly differs from the traditional value investing checklist, it still aligns with the principles of Rule #1 investing. He believes that an excellent company is simple and predictable, has a dominant market position, and a limited exposure to intrinsic risk. This week on InvestED, Phil discusses Ackman’s list in-depth, and explains why he has adopted this style of investing himself. For show notes and more information, visit www.investedpodcast.com. Learn more about your ad choices. Visit megaphone.fm/adchoices
Analyzing management of a company can be mostly subjective, so you must strongly consider the objective numbers—numbers that clue us in to the ability of management to allocate capital properly. This week on InvestED, Phil and Danielle discuss key elements of a quality business, including low debt, high return on invested capital, high free cash flow, and how you can use them to predict a company’s future. Learn more about your ad choices. Visit megaphone.fm/adchoices
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Comments (31)

Maxime Laroche

this podcast is seriously underrated

Aug 6th
Reply

Joe Ramirez

Ok you guys put me on an emotional roller coaster this entire podcast!!! LOL , I've been thinking a lot about airlines as well but now I have no idea hahaha

Apr 15th
Reply

Alex Johnson

Great episode! I appreciate Danielle's willingness to challenge and refine ideas, but it got to be a bit distracting with how much she sidetracked the conversation. Awesome talk, though.

Mar 26th
Reply

Daniel Payne

llll5

Nov 20th
Reply (1)

Matthew W. D'Ambrosi

Great episode. Most of us (the average person) have money locked into our 401Ks. The majority of these options are indexes or the like that you speak of in this episode. What would you suggest we do in terms of our "practice" in the way you teach? The average investor or new investor does not yet have the available capital sitting on the sidelines readily yet to deploy. Thank you! We listeners greatly appreciate you!

Oct 3rd
Reply

Samy

I started to like index funds this year and have invested in many ETFs through M1 Finance. But now I am back to square one with my retirement. Index funds aren't safe,then do we trust the fund managers of Mutual funds to do the right thing?

Sep 30th
Reply (1)

Tom MacDonald

Phil got it mixed up. two dice rolling 10 is much higher probability not lower than 6s or 7s. As a matter of fact the lower the number you are trying to roll the more improbable it becomes. There are five ways to roll a 10 there is only one way to roll snake eyes. the probability drops from 10 to 1

Sep 3rd
Reply (1)

Tom MacDonald

me too!

Aug 29th
Reply

Todd Watts

I really liked this episode. Informative, in a relaxed and not rushed manner. Looking forward to the next episode.

Jul 22nd
Reply (1)

Luis Paz

If I were a sentimental guy, this episode would have me in tears. This is exactly how I feel! Uncle Phil, and trying to get into this amazing family.! 😭

Apr 17th
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Neil Martin

lmao, Phil can you please share a time when bond funds fell 50%? Interest rates quadrupled between 1963-1982 and bond funds never came close to growth losses of 50%. Long term, bond funds like PIMIX are good investments especially as people approach retirement age. For younger investors, not as much. Also, index funds of major indices average 10% yoy going back 50 years. With compounding, that is a decent return for those not wanting to take the time to power through income statements or risk investing in individual stocks. I know you need to sell books but c'mon.

Apr 5th
Reply

Work Phone

love it!!

Apr 5th
Reply

George Scutaru

she interrupts soooooooo much...

Apr 2nd
Reply (1)

William Watson

I really enjoy listening to your podcast!...the father- daughter dynamic really appeals to me!!

Mar 6th
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Ariel Lee

Love this podcast and your books (Phils' and Danielle's). Your investing style really resonates with my personal values/philosophy and your fathwr/daughter exchanges are hilarious and helpful!

Jan 3rd
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Benjamin Westerfield

fantastic job!! love the book and pod cast.

Dec 31st
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AMama Lala

In regards to the part about "Window dressing" social conscienceness for a hundred companies makes me question the validity of Swell's Impact 400 index. are we saying that its NOT possible to get 400 companies that are making a positive impact?

Sep 19th
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AMama Lala

signed up. Thank you for sharing!

Aug 16th
Reply

Wes Mrowka

should new investors in training just hold cash while we get our feet wet, or put our money in a s and p index to at least earn 6-7% while we prepare?

Jul 27th
Reply

Stella Yang

why the toolbox is not free anymore? and a hefty $20/month??

Jun 6th
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