Key Principle No. 10

Look at lots of companies and start with the A’s.

Years ago a college student asked Warren Buffett,

“How can I become a good analyst?”

Buffett answered, ”There are 5000 public companies in the US, start with the A’s.” He went on to explain that there was no substitute for the experience gained by getting to know companies in a wide variety of industries.

I graded CFA exams with a young professor who had grown up in the house next to Buffett in Omaha. He sometimes played softball with Buffett’s son. He recounted a story of going down into Buffett’s basement early in the morning to help gather some softball equipment. Buffett was sitting in easy chair with a large stack of what he later learned were annual reports next to his chair. When he returned later that evening to return the equipment, the stack was gone. Buffet had spent the day reading annual reports.

The moral of the story is look at a lot of companies. Get to know their strengths and weaknesses. Eventually a few of them will experience short-term problems, and their stocks will become depressed enough to constitute outstanding value.

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