April 15, 2010 Volume 1, Issue 11

Buffett Munger Best Bargains

Tax Season Is Officially Over!
Some research studies have shown that over
70% of income taxes are paid by the top 10% of
In this issue:
wage earners. We hope you are in that bracket
or on your way to it.
Introduction 1
Since inception, this newsletter has issued
reports covering 13 stocks that have collectively
DST Systems Inc. 2
(DST) @ $42.33
produced over 14.76% in total returns and
there is still plenty of room for future growth.
Pre-Paid Legal Serv. 4 Again the challenge with providing a monthly
(PPD) @ $40.65
newsletter is that we are bound by a specific
date to provide ideas. The S&P 500 has moved
Credits & Disclaimer 6 past 1,200 for the first time since September
2008, yet the current opportunities present in
the market are not what they once were even 6
months ago.
INTRODUCTION TO THE BUFFETT-MUNGER BEST
BARGAIN NEWSLETTER
(3) Are priced with the highest
current rate of return (yield)
(4) Have a favorable outlook
going forward
Each month we will present a
company that we feel meets
this criteria. These, in our opinion, will provide
the very best opportunity for long-term growth.
Remember, that Warren Buffett and Charlie
Munger have followed the Ben Graham theory
on investing in companies using a “business
like” approach with some distinct differences.
Namely, Buffett, with the help of Munger, now
focuses on the long term prospects of the
business extending beyond just the
fundamentals into the brand and management
of the business. A great brand can withstand
poor management, but very seldom does it work
in reverse.

Therefore, this newsletter

By taking the Buffett Munger Screen along with
will look at the company’s
the Predictable Companies Screen, this
business model, history,
newsletter attempts to find stocks that… management, and market
(1) Show consistency and have years of earnings in order to find the margin
and book value growth of safety and intrinsic
value.
(2) Possess High Returns on both Equity and
Total Capital

This newsletter will not have

fluff and jargon just to fill the
need for space. The ideas will
be presented in a simple to
read and understand format
and will provide enough insight
to make intelligent decisions.
Disclaimer
GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no
circumstances does any information posted on GuruFocus.com or in this report represent a
recommendation to buy or sell a security. The information in this newsletter, and in its related
website, is not intended to be, nor does it constitute, investment advice or recommendations.
The gurus may buy and sell securities before and after any particular article and report and
information herein is published, with respect to the securities discussed in any article and report
posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any
damages of any kind arising out of the use of any content or other material published or available on
GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content,
including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental,
indirect, consequential or punitive damages.
Past performance is a poor indicator of future performance. The information on this site, and in its
related newsletters, is not intended to be, nor does it constitute, investment advice or
recommendations. The information on this site is in no way guaranteed for completeness, accuracy
or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC.
 Buffett Munger Best Bargains
April 15, 2010 Volume 1, Issue 11

DST Systems Inc. (DST)

Founded in 1969 as a division of Kansas City Southern Industries to

Stock Price: $42.33
Volume: 482,785
EPS Est.: $3.89 (2010)
Dividend: $0.30
Company News
* Gurus David Dreman
(576,839 shares) and
Jean-Marie Eveillard
(250,000 shares) own a
portion of DST.
* Self-made billionaire
George Argyros owns
over 9.7 million shares
of DST, giving him the
largest stake with 20%
of the shares out-
standing.
develop an automated recordkeeping system for the mutual fund
industry. Now DST is the largest provider of third-party shareholder
recordkeeping services in the United States. Obviously the industry has
been very good to DST and it continues to grow.
Over the last decade, DST has done a fantastic job of increasing its earnings per share
through stock buybacks; however, the market has actually lowered its perception of
the companies per share value from a P/E in the mid 20s to a earnings multiple of 8
currently. This could be because of the sporadic growth in book value even though they
have produced an amazing return on equity average of 50% over the last ten years.
In the words of Anthony Robbins; "The past does not predict the future," and it's no
different in the stock market. So, thinking about the future of this company and the
industry they serve, they could continue to improve their bottom line and they still have
over 50% of the outsourced mutual fund processing market in the U.S. This near
monopoly protects it from competitive pressure and if they can continue to earn high
returns on equity while buying back company stock, the price will surely outperform
the market over the years to come.
The Mutual Fund Industry (however poorly it may perform as a whole) is in no danger of
losing interest or money. And with a near monopoly, DST will continue to keep the cash
rolling in. We think the stock could get back to its 2007 high of $85 over the next few
years.

*GuruFocus uses the prior

days closing stock price. Company Financials (Latest Statement)
INCOME STATEMENT (2008 STATEMENT) FUNDAMENTALS:

Sales 2.22 BB Market Capitalization 2.06 BB

Balance Sheet numbers are
from the latest quarterly Gross Profit 471.8 MM Debt (Total) 1.22 BB
statement.
SGA Cost % 0.00% Cash (Total) 106.20 MM
Income Statement numbers
are from the latest annual
Interest Exp 0.00 Cash Flow (Current Yr) 362.40 MM
statement
Net Income 242.9 MM Book Value Growth 1%

BALANCE SHEET (LAST QUARTER) RATIOS:

BB - Billions

MM - Millions Current Assets 643.5 MM P/E (FORWARD) 10.25

K - Thousands Total Assets 2.97 BB Debt/Income 6 to 1

Financial Data in Dollars Total Liabilities 2.32 BB Return on Equity 55.38%

Shareholder Equity 650.0 MM Return on Assets 6.38%

Book Value 12.89

 Buffett Munger Best Bargains
April 15, 2010 Volume 1, Issue 11

DST Systems Inc. (DST)

Corporate Summary
Stock Price: $42.33
DST Systems, Inc. (DST) offer sophisticated information processing and software services and
Volume: 482,785 products. These business units are reported as two operating segments: Financial Services
and Output Solutions. In addition, investments in the Company's real estate subsidiaries and
EPS Est.: $3.89 (2010) affiliates, equity securities, private equity funds and certain financial interests have been
Dividend: $0.30 aggregated into the Investments and Other Segment. On March 31, 2009, DST purchased the
remaining 50% interest of Argus Health Systems, Inc.

Principal Offices Historic Price Charts

1600 333 West 11th While Warren or Charlie may never look at a company’s chart, GuruFocus.com feels that it is
Street 5th Floor vital to see exactly where this company has been.
Kansas City MO 64105

www.dstsystems.com

Phone: 816-4351000
Fax: 816-4358630

Industry : Information &

Delivery Services

Employees : 11,200

Exchange : NYSE

Key Executives
GuruFocus Analysis
Thomas McConnell, 60
Chief Executive Officer Using GuruFocus DCF Calculator, we have determined that the Fair Value of the company is
$92.34 based on an average growth rate of 20% and using the average collective market
790,848 Shares returns of 12% for our discount rate. We also used the current years earnings estimates. This
value represents a 55% Margin of Safety.

Business Predictability:

Intrinsic Value : $92.34

 Buffett Munger Best Bargains
April 15, 2010 Volume 1, Issue 11

Pre-Paid Legal Services Inc. (PPD)

Pre-Paid legal is one of the new models in the business world. By selling memberships
that allow access to legal services through a network of law firms, PPD has been able
to offer affordable legal advice to the masses.

Stock Price: $40.65
Volume: 67,098
EPS Current.: $5.03
Dividend: $0.00
News & Thoughts
* Guru Investor Jim
Simons of Renaissance
Technologies owns
602,900 shares.
* Pre-Paid Legal An-
nounces 2010 1st Quarter
Production Results. New
Sales Associates Enrolled
Up 58% - New Member-
ships Produced Up 9%
They charge members a one time fee of $49 to start and offer them an opportunity to
show their services while gaining a commission for others they sign up or help to use
the legal counsel inside the network.
Financially speaking the company has done a phenomenal job of growing steadily over
the last decade. Their sales are up to $454 million from $243 million and their
earnings have gone from $20.85 million to over $55 million. This growth along with a
drastic reduction in the amount of shares available to the public has helped the
company's earnings per share (EPS) increase from $0.92 to $5.04 per share.
The stock began trading in 1992 and was priced just under one dollar. Now at nearly
$40 per share it still looks like a pretty good value. The one amazing factoid is that
PPD has earned over one hundred percent on their equity for the last 5 years and
average over 30% on their assets. These two are amazing signs of wealth and
prosperity that few companies enjoy.
So, while the market has not priced the stock as high as it did 5 or 10 years ago based
on their earnings, the future is still very bright for Pre-Paid Legal. We feel the stock
could easily trade into the 90’s in the next few years based on their earnings growth
and stock buy backs.

*GuruFocus uses the prior

days closing stock price. Company Financials (Latest Statement)
INCOME STATEMENT (2009 STATEMENT) FUNDAMENTALS:

Sales 458.48 MM Market Capitalization 397.28

Balance Sheet numbers are
from the latest quarterly Gross Profit 281.43 MM Debt (Total) 43.38 MM
statement.
SGA Cost % 67.62% Cash (Total) 35.86 MM
Income Statement numbers
are from the latest annual
Interest Exp $0.00 Cash Flow (Current Yr) 67.79 MM
statement
Net Income 55.14 MM Book Value Growth 102% (10 Yr Ave.)

BB - Billions BALANCE SHEET (LAST QUARTER) RATIOS:

MM - Millions Current Assets 72.31 MM P/E (FORWARD) 6.47
K - Thousands
Total Assets 157.99 MM Debt/Income 1:1
Financial Data in Dollars
Total Liabilities 119.66 MM Return on Equity 157.24%

Shareholder Equity 38.32 MM Return on Assets 34.78%

Book Value 3.81

 Buffett Munger Best Bargains
April 15, 2010 Volume 1, Issue 11

Pre-Paid Legal Services Inc. (PPD)

Corporate Summary
Stock Price: $40.65
Pre-Paid Legal Services, Inc. designs, underwrites and markets legal expense plans. The
Volume: 67,098 Company’s life events legal plans (referred to as Memberships) provide for a range of
EPS Current.: $5.03 legal services. The identity theft related benefits include a credit report and related
instructional guide, a credit score and related instructional guide, credit report monitoring
Dividend: $0.00 with daily online and monthly offline notification of any changes in credit information and
identity theft restoration services. As of December 31, 2009, the Company had
1,547,585 Memberships in force with members in all 50 states, the District of Columbia
Principal Offices and the Canadian provinces of Ontario, British Columbia, Alberta and Manitoba.
Approximately 90% of such Memberships were in 29 states and provinces.
One Pre-Paid Way
Ada OK 74820
Historic Price Charts
www.prepaidlegal.com/
While Warren or Charlie may never look at a company’s chart, GuruFocus.com feels that it is
Phone: 580-4361234 vital to see exactly where this company has been.
Fax: 580-4367409

Industry :
Personal Services

Employees : 719

Exchange : NYSE

Key Executives

Randy Harp, 54
CEO - 14,845
Shares Owned

Harland Stonecipher
Chairman - 861,377
GuruFocus Analysis
Shares Owned
Using GuruFocus DCF Calculator, we have determined that
the Fair Value of the company is $90.47 based on their
average growth rate of 15.3% and using the average
collective market returns of 12% for our discount rate. We
also used the current years earnings estimates. This value
represents a 56% Margin of Safety, which gives the stock a
price gain potential of 130%.

Business Predictability:

Intrinsic Value : $90.47

About GuruFocus.com
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the investment strategies and stock picks of the best investors in the world including
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and insider trades of company executives in real-time. GuruFocus.com was
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fett. GuruFocus.com has been featured by the most prestigious magazines like
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financial instruments or strategies to you.

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Disclaimer
GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser.
Under no circumstances does any information posted on GuruFocus.com or in this report
represent a recommendation to buy or sell a security. The information on this site, and in
its related newsletters, is not intended to be, nor does it constitute, investment advice or
recommendations.
The gurus may buy and sell securities before and after any particular article and report
and information herein is published, with respect to the securities discussed in any arti-
cle and report posted herein. In no event shall GuruFocus.com be liable to any member,
guest or third party for any damages of any kind arising out of the use of any content or
other material published or available on GuruFocus.com, or relating to the use of, or
inability to use, GuruFocus.com or any content, including, without limitation, any invest-
ment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or
punitive damages.
Past performance is a poor indicator of future performance. The information on this site,
and in its related newsletters, is not intended to be, nor does it constitute, investment
advice or recommendations. The information on this site is in no way guaranteed for
completeness, accuracy or in any other way. The gurus listed in this website are not
affiliated with GuruFocus.com, LLC.