What will I learn about: why productive assets like company shares are superior to currency-based or unproductive investments for generating reliable, long-term wealth?

Discover why productive assets like company shares are superior to currency-based or unproductive investments for generating reliable, long-term wealth.

What will I learn about: evaluate businesses using the 'black box' metaphor by focusing your attention on a company's visible financial inputs and outputs?

Learn how to evaluate businesses using the 'black box' metaphor by focusing your attention on a company's visible financial inputs and outputs.

What will I learn about: the three telltale signs of a great investment opportunity by identifying companies that strategically use their profits for dividends, share buybacks, and retained earnings?

Understand the three telltale signs of a great investment opportunity by identifying companies that strategically use their profits for dividends, share buybacks, and retained earnings.

What will I learn about: the FALCON Method's 'buy and hold' strategy to protect your portfolio from emotional decision-making and the short-term inconsistencies of classic active trading?

Master the FALCON Method's 'buy and hold' strategy to protect your portfolio from emotional decision-making and the short-term inconsistencies of classic active trading.

What will I learn about: how to use objective, quantitative equations to effectively rank stocks and reveal which businesses are truly ripe for your investment?

Find out how to use objective, quantitative equations to effectively rank stocks and reveal which businesses are truly ripe for your investment.

The FALCON Method

A Proven System for Building Passive Income and Wealth Through Stock Investing

David Solyomi

★ 4.3 / 5(199 ratings)

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Money & Investments

If You're Curious About These Questions...

You should listen to this audiobook

💡What’s the secret to removing the hidden psychological biases that lead most casual investors to make costly mistakes?
💡Did you know that focusing on a specific set of reliable financial indicators can take the guesswork out of finding the best wealth-building opportunities?
💡What if you could follow a structured, numbers-driven process to create a reliable stream of passive income that grows over time?

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Key Takeaways from The FALCON Method

✓Discover why productive assets like company shares are superior to currency-based or unproductive investments for generating reliable, long-term wealth.
✓Learn how to evaluate businesses using the 'black box' metaphor by focusing your attention on a company's visible financial inputs and outputs.
✓Understand the three telltale signs of a great investment opportunity by identifying companies that strategically use their profits for dividends, share buybacks, and retained earnings.
✓Master the FALCON Method's 'buy and hold' strategy to protect your portfolio from emotional decision-making and the short-term inconsistencies of classic active trading.
✓Find out how to use objective, quantitative equations to effectively rank stocks and reveal which businesses are truly ripe for your investment.

Learning Tools

Reinforce what you learned from The FALCON Method

Mind Map

The FALCON Method

Core Philosophy+

The 5-Step Process+

Quiz — Test Your Understanding

Question 1 of 9

According to Warren Buffett's classification of investments, what is the fatal flaw of currency-based investments like bonds?

A. They do not generate any secondary income for the investor.
B. They are highly vulnerable to the depreciating effects of inflation.
C. They are frequently manipulated by unscrupulous corporate accountants.
D. They are considered unproductive assets that rely entirely on market euphoria.

Question 2 of 9

In the 'black box' metaphor used to describe companies, what does the issuance of new shares represent?

A. An output pipe that increases the overall value of the company's dividends.
B. A retained earning that fuels the company's long-term expansion.
C. An input pipe that dilutes the value of already-existing shares.
D. A share repurchase mechanism that boosts shareholder yield.

Question 3 of 9

How does the FALCON Method primarily differ from the classic 'quant' investing method?

A. The FALCON Method relies entirely on subjective judgment, while the quant method uses strict mathematical rules.
B. The FALCON Method advocates a long-term 'buy and hold' approach of reputable companies, whereas the quant method involves annually rotating stocks.
C. The FALCON Method focuses exclusively on cyclical stocks to maximize short-term gains.
D. The FALCON Method requires investors to trade daily to capitalize on market fluctuations.

Question 4 of 9

During the first step of the FALCON Method, why is a company's dividend history prioritized over its revenue reports?

A. Dividends are transparent cash payments that cannot be easily manipulated, unlike revenue figures.
B. Revenue figures do not account for the costs of ongoing expenses and debt payments.
C. Cash-flow figures are only relevant when evaluating currency-based investments.
D. Dividend history is the only metric required to be reported to the S&P 500 index.

Question 5 of 9

Why does the FALCON Method look beyond the S&P 500's 'Dividend Aristocrats' list when selecting top-quality companies?

A. The Dividend Aristocrats list includes too many highly volatile cyclical stocks.
B. Companies on the list are generally too expensive to buy at a discount.
C. The list only tracks companies that have paid dividends for 10 years, which is too short.
D. The list removes companies if they simply maintain, rather than increase, their dividend for two consecutive years.

Question 6 of 9

According to the text, what creates the opportunity for an investor to buy shares of a valuable company at a discount?

A. A fundamental decrease in the company's underlying value and physical assets.
B. Human emotions and market pessimism driving the stock price below its actual underlying value.
C. The company issuing a large number of new shares to the public to raise capital.
D. A period of extreme market euphoria that artificially lowers dividend yields.

Question 7 of 9

Which of the following correctly describes how 'shareholder yield' is calculated in the third step of the FALCON Method?

A. It is the expected annual dividend divided by the current price of the stock.
B. It divides a company's free cash flow by its total number of existing shares.
C. It adds the stock's dividend yield to the percentage the dividend has grown over the last five years.
D. It combines dividends and share buybacks, subtracts newly issued shares, and divides the result by market capitalization.

Question 8 of 9

When ranking the surviving stocks in step four, why does the FALCON Method suggest using a modified version of the Chowder Rule instead of metrics like dividend yield and free cash flow yield?

A. Because those metrics were already used as filters in the previous step, so new metrics are needed for ranking.
B. Because the Chowder Rule is the only metric that completely eliminates psychological bias.
C. Because free cash flow yield is too easily manipulated by corporate accountants.
D. Because the Chowder Rule assigns a higher weight to volatile, cyclical stocks.

Question 9 of 9

During the final step of the FALCON Method, subjective judgment is allowed. Which type of stock does the text advise investors to avoid during this step?

A. Stocks with a high Return on Invested Capital (ROIC).
B. Stocks of companies that frequently buy back their own shares.
C. Cyclical stocks, because their wild price fluctuations contradict the buy-and-hold philosophy.
D. Stocks from household name companies, because they are usually overvalued.