During the spring of 2014, I spent hundreds of hours looking for new investment ideas. I screened lists of stocks, thought about various industries that might be attractive, read magazines and newspapers, brainstormed with my associates, and reviewed lists of stocks recently purchased by other investment managers.1 But frustration was my companion. I could not find an attractive idea. I looked and looked and looked, but to no avail.

Then, on Friday, May 30, I noticed that the cover and lead story in the latest edition of Bloomberg magazine was about the three co-heads of Goldman Sachs’s investment banking business: David Solomon, Richard Gnodde, and John S. Weinberg. I had worked with John Weinberg’s grandfather, Sidney Weinberg, in 1966 and 1967, and had known John S.’s father, John L. Weinberg, who had been the co–senior partner of Goldman Sachs for many years. I decided to read the story, largely for entertainment. The article emphasized the strength and profitability of Goldman’s investment banking operations.

Out of curiosity, I went to my Bloomberg terminal and looked up Goldman’s share price: $159.80. I then looked up the company’s tangible book value2 per share: $145.04. Flash through the mind! Goldman was a premier company that was selling at only a 10 percent premium to its tangible book value. Second flash through the mind! Goldman had two businesses that required very little capital (investment banking and investment management) and two businesses ...

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