Charlie Munger, Vice Chairman of Berkshire Hathaway, speaks on behalf the companies stock investing formula. Munger mentions that Buffett follows a 4 step formula which has been the way he has managed through business in the past.

Those four steps include:
1. Understand the business
2. Sustainable competitive advantages
3. Able and trustworthy managers
4. Bargain Price (Margin of safety)

Watch the video below to listen to Charlie Munger explain these key points:

Berkshire shares, which have been down 40 percent from last fall have risen sharply with the financial sector stock rally.

However, Berkshire Hathaway has not received any TARP dollars and the company holds stock valued at more than $13 billion in the top recipients of TARP funds.

According to the Houston Chronicle, Berkshire is at least twice as dependent on bailed-out banks as any other large investor.

“I am, to some extent, betting on the fact that the government will do the rational thing here and act promptly,” Buffett told CNBC after investing $5 billion in Goldman Sachs.

“If I didn’t think the government was going to act, I would not be doing anything this week.”

Buffett’s stake in the bailout has been closely watched and people can draw their own conclusions. Only time will tell what Berkshire awaits in the long run.