Ep 3 Secrets of a Stockpicking Star | Summary and Q&A

March 11, 2022
Stanford Graduate School of Business
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Ep 3 Secrets of a Stockpicking Star


The decision to buy a good business involves considering factors such as the quality and price of the company, the presence of a competitive advantage, and the ability to withstand and learn from mistakes.

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Key Insights

  • 🧑‍🏭 Price is a crucial factor in investment decisions, as overpaying or underpaying for a company can affect the outcome.
  • 🤩 Identifying a competitive advantage and accessing information others don't have are key to finding good investment deals.
  • 🌸 The ability to withstand losses and learn from mistakes is an essential skill in investment management.
  • ❓ The culture of not admitting mistakes in the financial industry can hinder learning and growth.
  • 👋 Evaluating the quality and price multiples of a company can help determine whether it is a good investment opportunity.
  • 👋 Individual investors may struggle to find good investment opportunities without the resources and skills of professional investors.
  • ✋ Early arrival to an investment opportunity can increase the potential for higher returns.


[MUSIC] I'm Jonathan Burke, the AP Germany professor of finance at the Graduate School of Business at Stanford University. >> And I'm Jules Van Vince Bergen, the Nippon life professor in finance at the Wharton School at the University of Pennsylvania. Join us on a journey as we explore the science and strategy of better decision making. >> Today, w... Read More

Questions & Answers

Q: Is buying a company based solely on the quality of its products a good investment strategy?

While a company that makes good products may be seen as a better investment, other factors such as price and competition must be considered. Holding all else equal is not feasible, and it is crucial to evaluate whether the price of the company is reasonable.

Q: How do investors make money from good companies if everyone else also knows about their potential?

The key is arriving early to the investment opportunity, being the first one to recognize the quality of the company's products. Only then can investors potentially make higher returns. However, if everyone arrives at the same time, it becomes challenging to make extra money.

Q: Can average investors identify good investment opportunities by themselves?

It is rare for non-professional individuals to find attractive investment opportunities due to competition and the lack of resources and skills compared to those who dedicate their careers to it. While good and bad investment decisions exist, the average investor may struggle to tell them apart without a competitive advantage.

Q: Why is it important to consider the price of a company when making an investment decision?

Overpaying for a good company can lead to a bad investment, while underpaying for a bad company may result in profits. The key is to find a balance between the quality and price of the company to make an informed decision.

Summary & Key Takeaways

  • Jonathan Burke and Jules Van Vince Bergen discuss the decision-making process of buying a good business, whether it's an established small business, a new brand, or a division within a conglomerate.

  • The conversation touches on the importance of considering the price of a company, as overpaying for a good company is a bad investment strategy, while underpaying for a bad company can lead to profits.

  • They explore the concept of a competitive advantage and the difficulty of finding good deals in the stock market, emphasizing the need for individuals to have the resources, time, and skill to identify investment opportunities before others do.

  • The conversation also delves into the role of price multiples and relative measures of valuation in determining whether a company is a good investment.

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