In this lesson, we learned the importance of buying a company that has a strong return on equity. Since the market price of the stocks you buy is dependent on the dividends and the growth of the book value, we can quickly learn that a company that grows it's book value at a faster pace is more valuable.

When we assessed two different companies in the video, we created a situation where both companies had the exact same earnings. The difference between the companies was the size of their equity (or book value). When a company with a large amount of book value is compared to a company with less book value, the percent change in their growth will be much more difficult if earnings are similar.

When a company consistently has a strong Return on Equity, we know as investors that the management of the company is properly reinvesting the earnings of the business into assets that will continue to grow the capital earned. This is very important since most of the earnings produced by a company are retained and not paid as a dividend. When a disciplined investor purchases companies with a sustained high ROE, their investments compound at a much higher rate than other assets. The great thing with purchasing companies with high ROEs is that it helps alleviate capital gains tax if the security is held for a long period of time.

1. What is Value Investing?
2. Value a Small Business like Warren Buffett
3. What is a Balance Sheet and Margin of Safety
4. What is a Share
5. (PE). Finding Basic Stock Terms
6. Warren Buffett Stock Basics
7. What is a Bond
8. What are the components of a bond
9. Value a Bond and Calculate Yield to Maturity (YTM)
10. What is the Stock Market
11. Stock Market Crash and Market Bubbles
12. What is the Fed
13. What is Financial Risk
14. What is Inflation
15. What is the S&P Rating
16. What is a Yield Curve
17. How to use a Bond Calculator
18. Warren Buffett's Four Rules to Investing
19. Warren Buffett's 1st Rule - What is the Current Ratio and the Debt to Equity Ratio
20. Warren Buffett's 2nd Rule - Understanding Capital Gains Tax
21. Warren Buffett's 3rd rule - A stock must be stable and understandable
22. Warren Buffett Intrinsic Value Calculation - Rule 4
23. What is Preferred Stock
24. Calculate Yield to Call and How to buy Preferred Stock
25. Calculate Book Value with Preferred Stock
26. What is Income Investing
27. What is a Cash Flow Statement
28. How to read a cash flow statement
29. When to sell stock like Warren Buffett
30. What is Return On Equity - Warren Buffett's Favorite Number
31. (PE) Return on Equity Practical Exercise
32. What is Stock Volume
33. How to calculate stock terms
34. How to use a stock screener
35. What is Goodwill on a Balance Sheet
36. Warren Bufett's Owner's Earnings Calculation
37. Warren Buffett DCF Intrinsic Value Calculator

This course will teach you how to invest in stocks and bonds like Warren Buffett. It is highly recommended that you take all the lessons in order.

Download Preston's 1-page checklist for finding great stock picks: http://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:

http://www.amazon.com/gp/product/0982967624/ref=as_li_tl?ie=...

http://www.amazon.com/gp/product/1939370159/ref=as_li_tl?ie=...