Deep within the 2011 Berkshire Hathaway Annual Shareholder’s Meeting lies a pocket of wisdom from Charlie Munger. Here’s how he would go about teaching finance at a business school:

Shareholder question: In a book about Charlie, “Damn Right!” by Janet Lowe, Charlie talks about his view on teaching finance. He says that he would use the histories of a hundred or so companies that did something right or wrong as a basis for teaching the course. …


When valuing a company, the objective for the investor is to try and find a gap between price and value — between expectations and fundamentals. Expectations reflect the market’s perception of the future free cash flows a company can generate to justify its price in the market. The fundamentals hold the truth to those expectations. The investor generates excess returns by finding mispricing between the two.

Of course, in order to do a proper valuation — getting to the core of the fundamentals — the investor must have a firm grasp on the company’s prospects for creating value.

So, how…


Once in a while, you stumble upon a case study that collects your thoughts just enough to give you a moment of clarity.

I stumbled upon one of those when I read the following email correspondence dating back to August 1997. The exchange was between Warren Buffett and Jeff Raikes who at the time was working as a sales manager at Microsoft. (Later, Raikes was named a company president and then went on to be the CEO of the Bill & Melinda Gates Foundation from 2008 to 2014.)

Raikes’ e-mail to Warren gives a very simple walkthrough of Microsoft’s exceptional…


The fact that the market is partly efficient is really a gift.

The idea of an efficient market can easily be summed up in a short story:

A student walks around campus with a professor and comes across a $100 bill laying on the ground. Just as the student stops to pick it up, the professor says, Don’t bother. If it was really a $100 bill, it wouldn’t lay there.

The efficient market hypothesis was put forth by Eugene Fama in the 1960s. It postulated that stock prices reflect all available information and trade at exactly their fair value at all times. If there really was a $100 bill, someone would’ve already…


A mathematics teacher stands in front of a googly-eyed crowd of students.

These students are about to learn one of the most important lessons in their lives.

The teacher holds up a blank piece of paper which he folds in half. He then poses the problem: I guess all of you would agree that there is practically no difference in the thickness of this paper after it’s folded in half. It’s still a thin piece of paper, as paper is. But let’s now imagine that I did this forty-five times. How thick do you think it would become?

The students…


Moral hazard is present in more domains than you think. Learn the useful skill in life of spotting moral hazard by using these three mental models.

You just bought a shiny new bike.

It wasn’t a cheap bike and you ride it around everywhere. You want your new bike to remain as new as possible, and so you take care of it with all your heart. You buy the strongest bike lock that money can buy, and so you lock the bike everywhere you go even as you only park it in theft-safe spots. You even take the seat with you.

One day, you discover that your renters insurance not only covers theft and disasters but also your bike. …


One of the most frequent questions I get asked from new members at Junto is how we can just sit inactively almost entirely throughout the year with all that is happening in the market and the world.

And when I’m asked at dinner parties (as a courtesy) how I invest, the questioner usually looks with skepticism when I say I probably make 1–3 important investing decisions per year, either buying or selling.

“That’s not a way to invest. Didn’t you say you did this full-time?”

But it is exactly the way to invest.

To people outside the world of finance-the…


Spotting an economic moat in a business before the fact is not an easy thing to do. Here are seven signs to start off from.

The term economic moat has become widely familiar in the investing world. It refers to a business’s ability to maintain competitive advantages over its competitors in order to generate excellent returns on invested capital.

The key word here lies in maintain. An economic moat is not simply a competitive advantage that currently allows a company to earn excess returns over its competitors and cost of capital. It’s one that is expected to last, continuously fending off attacks to the economic castle.

In our previous note about return on invested capital (ROIC), we did a comprehensive walkthrough of how to properly…


Ever since its publication in 1949, The Intelligent Investor has widely been considered the stock market bible.

Not only were readers of the book blessed with a thick book written from arguably the greatest financial minds of the time. They were blessed with the fact that Graham wrote the words directly to the layman.

Of course, The Intelligent Investor is destined to be in the Junto book notes. After all, the lessons that Ben Graham puts forth are the epitome of what Junto is all about.

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This is the fifth or sixth time I have blazed through The Intelligent…


Return on Invested Capital: The Complete Lesson to Calculating It Right

Clayton Christensen, who sadly passed away in January last year, pioneered the fields of management and innovation.

His book, The Innovator’s Dilemma, was called one of the six most important business books ever written by The Economist. Andy Grove, then the chief executive of Intel, said a year after its publication that it was the most important book he had read in 10 years. In 2011, Forbes called Clayton one of the most influential business theorists of the last 50 years.

Now, why is Clayton Christensen important for our…

Oliver Sung

I invest and write about it at Junto Investments.

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