5. Warren Buffett Stock Basics

Download Preston's 1 page checklist for finding great stock picks: buffettsbooks.com/checklist
Preston Pysh is the #1 selling Amazon author of two books on Warren Buffett. The books can be found at the following location:
www.amazon.com/gp/product/0982...
www.amazon.com/gp/product/1939...
In lesson five, we learned that Warren Buffett has four rules that he uses for investing in stocks. All the rules must be met in order for him to purchase shares of a company. Those four rules are the following:
Rule 1: A stock must be stable and understandable
Rule 2: A Stock must have long term prospects
Rule 3: A Stock must be managed by vigilant leaders
Rule 4: A Stock must be undervalued
We also learned a very basic valuation technique that Warren Buffett used when he worked for Benjamin Graham. The technique multiplies the P/E ratio by the P/BV ratio and the result needs to be lower than 22.5.
A key fundamental of Warren Buffett stock basics is the idea that the stock market is nothing more than a location where he can buy or sell his shares. The market only provides a platform for him to purchase undervalued companies. He always buys on the assumption that they stock market could close tomorrow and not open for five years ñ and it would have no impact on his decision to buy a particular company.
Finally, we learned that Warren Buffett possess great patience. He never tries to make enormous gains, but instead consistent gains at reasonable levels. He always thinks for himself and always determines the value of a stock based on what HE thinks a company is worth - not the market.

[@AUstinnesc]

Don't forget that Charlie Munger and Warren Buffett invented the idea of investing and buying at both market highs and lows. As Warren Buffet noted, he has witnessed this occur frequently during his life. I'm not a trader. Never did my husband and I make more money than others in the middle class. With a $4 million stock portfolio, we intend to retire at age 58. Never have we ever sold even one share of stock...

[@corrySledd]

@Margaret22- It really isn’t about how much you save, it’s about how you manage your money. Whether you work to earn income or invest, it still boils down to income vs expenses, so yeah you may look into financial advisors for a strategy that suits your timing....

[@sherryie2]

@@corrySledd The fact that the market has been on its longest bull run ever makes the widespread anxiety and excitement comprehensible. There are opportunities if you know where to go, as you noted that it wasn't difficult for me to earn more than $780k in the previous 10 months. Since I was aware that I would need a reliable and strong plan to get through these tough times, I engaged a portfolio advisor.

[@McElvinn]

@@sherryie2 Do you mind sharing info on the adviser who assisted you? been saving for pension since age 34 - company scheme. along the way I hit higher tax, so I added to my company pension with a SIPP (tax benefits) I'm 46 now and would love to grow my finance more aggressively.

[@sherryie2]

@@McElvinn Have you heard of "NICOLE DESIREE SIMON? She gets featured regularly on CNBC. Everyone in my office works with her including myself. I personally use tax-deferred accounts to hold my investments. That way I avoid capital gains taxes. There are other options your advisor could brief you about.

[@McElvinn]

@@sherryie2 Thank you. I just checked her out now on the web and I've sent an email. I hope she gets back to me soon. I've been thinking of doing this for a long time now, and I've procrastinated enough already.

[@Alfosan2010]

Preston, you are doing gods work. I really appreciate it. If you were a "stock" I would definitely buy you and hold you long term.

[@agirlfriendfreeboy3245]

Do you like my Nickname? I've made you waste 5 sec HAARAWRARARARAARHAÆ

[@MAOOMI]

This is so sweet

[@lancewhitehorse1703]

You gotta say 'No Homo' after some shit like this

[@clickhere7129]

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[@ZenTradeGame]

Idk man Sounds like slavery to me 🤔

[@wayneoh7710]

Watching this during the 2020 virus lockdown!! Such a good use of spare time. Amazing lessons, thanks

[@keeganpullar386]

Same bro

[@danndeelion]

Myself as well! Brushing up on some very good lessons, this one especially!

[@adeyemidaremoses]

Same here. I see the crowd rushing to the index market but my instinct tells me to learn more. I tried to read security analysis and the intelligent investor but they seems too complex for my novice mind. I’m glad I found this series. I will definitely watch it multiple times and continue to save, before participating in the stock market. WB already warned about the 2021 crash.

[@Nico-qs5dy]

I can’t thank you enough! You are literally the only one that explains everything in such a way that I can fully understand it!

[@dimaskelvianto5173]

Dear Mr Preston Pysh, Greeting from Indonesia. I would like to thank you so much for all your educational videos you made for all of us, especially for me. You made it so simple and relevant. Wishing you all the best in whatever you do and your future endeavors! Thank you once again!

[@pauexclusive8932]

I was looking for in-depth knowledge about the subject without being overwhelmed. Bless this channel and thank you!

[@ScalperSpecltr]

Preston, from the bottom of my heart, I would like to thank you for all the videos and knowledge that you are sharing with us. During the course of my learnig the thinking process of WEB, I have browsed tons of materials, but, I have to admit that noone has impressed me as much as your videos. Please keep on adding materials, and helping us. I am just blown away with your website and materials. Thanks.

[@surao8257]

This is by far the best lessons I have seen on Stock market. Why can’t universities teach us in such a brilliant way? Great jo!

[@eyoong9065]

I first started learning from Preston since Dec 2016. Preston had changed my life completely. I and my family is so happy we have people like Preston that providing great help to the community. The most valuable thing i learned and hardest to do was not to do anything and wait for the right opportunity . I am currently (Apr 2020) 60% on USD cash & 20% on PM (physical & hi quality gold equities). Unfortunately i bought more physical silver that lag, subjected to industry demand and less liquid than gold which i should be the other way. I guess i just need to be more patient for silver time. Thanks Preston

[@stevevonrock2416]

thank you preston. i can finally say i found a teacher i can understand on the subject material. first channel i have ever subscribed to. thanks again

[@sunilvamadevan1354]

Thanks for making the calculations to be understood clearly & thereby helping to be safely positioned in the market !

[@ItzMaxYongz]

Holy , thank you very much sir ! I can't believe all of this course are free !! May god bless you and your family !

[@janscending]

I have to tell you Preston I am someone who takes a while to understand this stuff usually anyway but with the videos you are posting it makes it really easy and simple.I also like how you follow through each lesson on to the next one with the theme of Nancy :-) really great.Much Appreciated

[@MrJonRio]

This is a great series of videos and very easily understandable. I very much appreciate that you have gone to the trouble. May blessings follow you.

[@sumitmahajan7983]

Thank you Preston for making it so easy to understand for other people and sharing your knowledge.Really simple video with tons of information.Thanks again.

[@rowanphillips3497]

I love your course. Its very well structured and I've already learned a lot.

[@ricalovesjesus]

I’m learning so much from you! Thank you for talking the time to make these videos it really means a lot to those of us new to investing.

[@joehawk1207]

Great video man. Difficult concepts made easy to understand. Thank you very much!

[@BrandonChung]

This is amazing, how is it free! Thank you for simplifying stocks.

[@alexshay7969]

Thanks for pointing me to Google Stock Screener :) I went through some of your lessons a couple of months ago and I realize that I dind't understand very well, and I came back to them and I'm surprised to find that things are starting to click better. I plan to go through all of them trying to really understand each lessons. Thank you!!

[@eric4438]

I have been everywhere these past couple of weeks trying to wrap my head around a cohesive understanding of how to gain the knowledge I need to do my investing with not much success. Been reading a lot and watching a lot of videos and tutorials but none as constructive of how you did your videos. Thumbs up and Great work!

[@user-fk1rd2cp3s]

Hi Preston so far iv'e watched the first 5 videos and thet are all grea!! i have been trying toread Graham's book translated to Hebrew but since i have no financial background i had reall hard time understanding what he was talking about, and your videos really start with the basic concept that make everything look simple and undestnadable, so THANKS!!

[@TooToo246]

Thank you preston for you useful vids, I really appreciate your time and effort. Keep it up

[@PrSp00]

Good morning. First of all, let me tell you that you did a great job . Before , for me, the stock market was a mess . Now I feel more confident , and possessed of some tools that allow me to see beyond the basics. You won another subscriver. My sincere thanks, from Portugal.

[@samuelspencer5047]

Preston Pysh; I wish to show my gratitude for your videos by saying an abundant thanks to you for creating a video that is undoubtedly a great guide for us all in the area investments and finance, truly thank you.

[@antoniowakefield2449]

Love this page it makes everything so much easier!!!

[@jeremysmall9101]

Preston thank you, Sir, for this invaluable information. I started 2 weeks ago on Audible listening to Tony Robins Unshakable and it has opened my eyes to the industry and brought me here. I am very grateful for what you have done. Best Regards

[@andreymaksakov4975]

Taking this course is value investing in itself. Tons of useful insights for free. Very well structured and methodical course. Excellent for the newbies and a great rundown of the basics for those in the game.Highly recommended. Thanks a lot, Preston. Greatly enjoy your podcasts as well. By the way, I am in Central Asia.

[@as04211]

love love love your courses!!! very easy to understand. thanks so much for sharing your videos.

[@JamesGamesMTG]

Man I keep coming back to these videos! Really good playlist for new investors!

[@BenjaminDaly]

These videos are so valuable Preston. Many thanks!

[@Fascistbeast]

Thankyou from Australia 🇦🇺 Just discovered your channel!

[@Rick24.]

Thank you Thank you Thank you I can't thank you enough very well explained very easy to follow good job!

[@mps6934]

Starts with the fundamentals and then applies them nicely to stocks! Thanks :)

[@kdz2369]

These lessons are GOLD!!

[@georgebeaulieu8976]

Excellent and concise explanation indeed. You spoken slowly and clearly and it is refreshing. I will only add that one must also improve the market timing after that using the Elliott wave principle. Thank you for this essential tutorial. Best regards.

[@realitycheck_]

This the best and the easiest explanation of stock market I've ever found on YT! I'm very grateful for that. Thank you Preston for sharing your knowledge with us.

[@ArunRangarajan]

Great videos, Preston! You are a master teacher and should continue making such lessons. One small addition, if I may: the max P/E of 15 was chosen probably based on the AAA bond yield at that time. Graham suggested earnings yield of at least twice the AAA bond yield to James Rea (Rea's memoir on Graham in 1978). As of today (Oct 1, 2017), the AAA bond yield is 3.64%, so the max P/E would be 100/(2*3.64) = 13.7

[@CE-vd2px]

Thank you so much for this information! Does this apply to evaluating real estate as well? What is a good source for real estate knowledge?

[@elizabethjack595]

Thank you so much for sharing your experience and skills and knowledge and so helpful I am really interested in this video on KZbin channel loved it I am really want to learn more about increase Money's

[@alialrubayee734]

Incredible value in these videos. Thankyou so much

[@nomepersaud6764]

Amazing work Preston, keep this grand work up!

[@jobmascardo1694]

You explained very well Preston. Thank you!

[@luisf7105]

Thank you for keeping this really simple, and not speaking over beginner's heads like mine!

[@shwet7488]

Just Awesome !! I am enjoying so much. Thanks a lot for your efforts !!

[@bloodsportfilms]

Great video! Very simple and easy to understand, good job!

[@gruminatorII]

Absolutely love your presentations up to now, would have come up with the P/E multiplied by P/B value myself before you said it, thats how clear the previous explanations where. Thank you !

[@chetansoni4473]

Thanks for putting it out so clearly and smartly! Surely will help..

[@messi3666]

u and jazz are the best youtubers explaining about stock

[@specialistsprofessionalsin1331]

Your explanations are crystal clear

[@555avi]

I'm still going through your course 1. gr8 tutorials by the way. Was just wondering if your formula p/e * p/b.v

[@jeremybaybayan3728]

Thank you for posting these videos. Really helping me invest into my future.

[@thedonmaster007]

Hi preston, you said the three main things to be looking at are price, earnings and book value. but what about growth? the company may not have great numbers right now, but may be growing at a rapid rate and will have great numbers in the future? Don't we factor in growth (e.g. the PEG ratio?)

[@cristynaive]

I'm so glad to find your channel. Thanks for sharing your video

[@ofeklevi5767]

your lessons are amazing man thank you

[@julianvalencia6061]

This is awesome information. The only thing I would change would be to give examples with actual, real life, businesses and stocks so that it is more directly applicable.

[@tinnguyen2219]

Thank you so much for sharing such useful Data. Greatly appreciated!

[@linos1987]

I would strongly recommend you guys do a follow up/ or a remake of this course, I would buy it to support. Really excellent job.

[@stephanieoconnor3114]

Nice intro on P/E that I was struggling with. Agree that a stock like AT&T is underpriced. even more so right now in the COVID 19 crisis. BUT AT&T does pay a great dividend. So I do consider dividend payout and history behind the dividend that's paid as very important.

[@gameinws]

This course was too good man. I love you. Thanks

[@RubenGomezRealestate]

Thank you, I will buy your books also. Your education is priceless!

[@mahesh8925]

Preston, thanks for sharing such value adding information.

[@Exceltrainingvideos]

Lovely! Thank you.

[@IMKLASH]

Your a great teacher, not many around these days. Thanks alot!

[@maboshesekeli856]

@Preston Pysh. Thank you for the simple and clear video, my concern is what do i compare to the market price for me to conclude that a stock is undervalued? After a company has passed all the four rules? Rule 1: A stock must be stable and understandable Rule 2: A Stock must have long term prospects Rule 3: A Stock must be managed by vigilant leaders Rule 4: A Stock must be undervalued

[@summercoat8122]

I love this, I haven't yet read Benjamin Grahams book or anything on Buffet but this has already been my strategy and it has paid off great for me.

[@Agdgjfjfkttgkv]

great video. thank you so much. but how do you calculate the safety in percentage?

[@abdoulaisecka8539]

Very understandable, and good structure in the chapters. Greetings from Oslo,norway!

[@ericweryanto2363]

Love it! What a great way to deliver it!

[@sanjibmuscat]

Your videos are really great. You also explain it quite clearly. Also the advice you had given in your comment regarding Google Stock Screener is quite helpful.. Please put some advise like this (google screener or for some reference material) in your comments. That will help everyone who is following you, immensely.

[@boipinoi604]

Preston, thanks for the videos and the help!

[@rohitvarkhedkar]

I love your videos..... after this i feel confident investing in stocks now :)

[@weasel182]

I know this video is 7 years or so old, but I still think the rules apply ever more so and I'm loving the video series! I just wondered though Preston, can you pick stocks and companies to invest in based on the valuation tool of P/E and P/BV purely and the 4 rule approach? Thank you

[@daveletsgo39]

it has been said their is no greater deed than helping those less fortunte it,i beleive this applies to education more so than any other aspect of life.thank you for your generosity.

[@dangeles95]

This a a great lesson! I am curious if you, or anyone made an excel spread sheet to plug all these numbers in to get the info needed?

[@Professorsavingsposts]

you are a gifted teacher

[@hugopolo5678]

Incredible Course!!!! Congratulations for this

[@Raskolnikof27]

Thats a great tutorial!Thank you for devoting your time to it! I have one question though.. With an online account can I trade stocks in any market throughout the world?I mean can i buy stocks from NASDAQ but also from say the Moscow Exchange?

[@harshildave6482]

Amazing brother. I like P/E and P/B combine formula for value investing. Thank you so much.

[@altargirl89]

I appreciate these videos thanks so much for posting

[@kenanlambo]

Can u do a video on how to find a book value per share and also the number of outstanding shares on a stock quote from any of the websites, such as MSN, Marketwatch etc

[@aseem4879]

Excellent presentation. Many thanks !

[@JaySmith-rv4ro]

Can you make a video going over quarterly earning reports on Sec.gov? Or a mock report? And what to look for?

[@linokakiva4775]

I’m really trying to learn this

[@terrychen2916]

The rest is up to you assess the growth potential (If it has any growth potential left) and whether it current market price is below what you believe the intrinsic worth of the business is.

[@jozefmatyasek]

thank you so much for great lessons. This is exactly what we all looking for. Can you help me ? Which lesson is about negative P/E or negative P/BV ? because I found lot of companies with even negative EPS and I don't know if its bad sign or good sign. thank you for your answer. you are great

[@maddrunn]

Thank you very much for posting this! Do you have any suggestions for teaching the basics to children at various age & grade levels using videos?? Thanks again.

[@FredoCorleone]

This guys is the absolute best explaining those things...

[@boipinoi604]

Great video btw. Just found your channel. I will go through your other videos

[@bmxider]

Excellent lesson. Clear, concise and very accurate

[@bmxider]

No. THANK You for Lecturing. I really like everything about Mr. Buffett

[@paulburger9904]

Fantastic video! well researched and explained.

[@vigilant545]

very eye opening..great teacher, thanks for this!

[@bensonandyou]

Very Good lectures. I have learned a lot. i was wondering how to calculate the P/E ratio? market value per share is changing in every moment, and the income statement and balance sheet come out once a year. how to pick a market value per share when calculating?

[@arteniskryenadhi2681]

Loving it... Great content!!

[@MrSAM10099]

Hi Sir the way you explained was really fantastic ..I am actually new to the Stock market and looking for long term investments in India...still learning and hoping if this formula still works in 2020 ???? Please help me on this

[@zrt95]

perhaps this is addressed later, but for book value calculations do you deduct intangible assets and/or preferred shareholder equity from the total equity?

[@AhmedOmar-qy4ss]

Hi Professor Preston Pysh : i have question and i could find out how you figure it out in mintes 12:14 while you are showing two table of number P/E is 5 = 20% in return from where you get P/E is 10=10% in return up to P/E25= 4% Return i can understand from where we got P/E 5 = 20% but i couldn't understand from where the rest comes as well as with P/BV 5 = 20% safety up to P/BV .7 = 143% from where all this number come , if you take in the consideration that nancey business p/bv=14.28 ? thank

[@arung1989kumar]

Thanks for the video and it was easy to understand.

[@anthonyvill2051]

Dude i just wanna say thank you for this video. You helped me understand a lot more with investing and picking stocks. After i saw your video, i went through the whole top 300 australian stock exchange list and found some undervalued stocks to further investigate. Yesterday i bought an undervalued stock that no one wanted and that everyone was dumping due to a single negative report by a financial firm. It turned out that it wasn't true at all, so that's when i went in and buy. With your vid, i feel more confident with stock picking because it's all about the fundamentals. One question though, when you say 10-15% return, is that annual? Thanks.

[@JayPatel-iu7pl]

Very informative ....good job!