Narrator: A few years ago, the investment giant Fidelity conducted an internal study to see which of its clients performed the best. The results were startling. The top-performing accounts belonged to investors who were either deceased or had completely forgotten they even had an account. This counterintuitive finding reveals a difficult truth: in the world of investing, our own activity, driven by fear and greed, is often our greatest enemy. We trade too much, react to noise, and let our emotions sabotage our long-term goals.

This very paradox is the foundation of David Solyomi’s book, The Falcon Method: A Proven System for Building Passive Income and Wealth Through Stock Investing. Solyomi argues that the key to building wealth isn’t about having a higher IQ, finding secret stock tips, or frantically trading the market. Instead, it’s about having a disciplined, repeatable, and psychologically sound system that protects us from our worst instincts and allows the power of compounding to work its magic.

Narrator: Many investors, even professionals, fail to beat the market over the long run. Why? Solyomi argues it’s because they lack a consistent, emotion-free process. They might have a strategy, but they abandon it during periods of panic or euphoria. The S&P 500 index, by contrast, consistently outperforms a majority of active fund managers for one simple reason: it executes a simple strategy without emotion. It mechanically buys and holds the largest companies, rebalancing based on clear rules, never getting scared or greedy.

Investing without a system that governs your decisions is just a sophisticated form of gambling. You are relying on luck, gut feelings, and the hope that you can outsmart the collective wisdom of the market. The FALCON Method is built to be that system. It is a structured, largely quantitative process designed to limit psychological errors. As Solyomi emphasizes, you must focus on what you can control—the process—and let the results take care of themselves. The goal is to build a framework that forces discipline, ensuring that decisions are based on logic and data, not on the day-to-day noise of the financial news.

Narrator: For an outside investor, a company is essentially a "black box." You can never truly know everything that happens inside. Instead of getting lost in the operational details, Solyomi advises focusing on the "money pipes"—the cash flowing into and out of the company. Cash comes in from revenues, borrowing, and selling equity. It goes out for expenses, capital expenditures, debt payments, taxes, and finally, profits.

What happens to those profits is critically important. They can be paid out as dividends, used to buy back shares, or retained to grow the business. As Warren Buffett noted, management's skill in allocating this retained cash is what separates great investments from mediocre ones. Some managers turn every retained dollar into a "two-dollar bill" of future value, while others turn it into a "fifty-cent piece." The FALCON Method is designed to identify companies whose money pipes are flowing in the right direction—specifically, those that generate enormous amounts of "no-strings-attached cash," or free cash flow, and have a history of using it wisely to reward shareholders.

Narrator: Even the world's greatest company can be a terrible investment if you overpay for it. Solyomi breaks down total return into three components: the dividend yield, the growth of the underlying business, and the change in the valuation multiple (the price the market is willing to pay for the company's earnings). The real key to outsized returns lies in what Warren Buffett called the "double-dip benefit." This happens when you buy a great company not only for its future growth but also when it’s temporarily out of favor and trading at a cheap valuation. You benefit once from the company's earnings growth and a second time when the market recognizes its mistake and the valuation multiple expands back to its historical average.

Solyomi uses the real-world example of CVS Health to drive this point home. An investor who bought CVS in 1998 at a sky-high valuation of 55 times earnings earned a paltry 2.5% annually over the next decade, even though the business itself grew tremendously. The collapsing valuation wiped out the gains. In contrast, an investor who bought the exact same company during a period of pessimism at just 10 times earnings and held it until the valuation recovered to a more normal 14 times earnings achieved a 20.6% annualized return. The company was the same; the price paid made all the difference. The FALCON Method is explicitly designed to find these "double-dip" opportunities: wonderful companies at fair or cheap prices.

Narrator: The FALCON Method is a systematic filtering process designed to narrow the vast universe of stocks down to a manageable list of high-potential candidates. It begins by defining a universe of quality companies—specifically, those with at least 20 years of paying dividends without a single cut. This immediately focuses the search on stable, established businesses with a proven ability to generate cash.

Next, the method applies a set of absolute threshold criteria. A stock must offer a reasonable dividend yield, a strong free cash flow yield (to ensure the dividend is well-covered), and a positive shareholder yield (which combines dividends and net share buybacks). This step is crucial for avoiding "value traps"—companies that look cheap but are fundamentally flawed. For instance, a company like Teva Pharmaceuticals once offered a high dividend yield, but its negative shareholder yield revealed it was issuing massive amounts of new stock, diluting existing owners. The threshold criteria would have disqualified it immediately.

Finally, the stocks that survive these filters are ranked using a multifactor model that balances current dividend yield with dividend growth prospects, ensuring a focus on total return, not just high current income.

Narrator: While the FALCON Method is about 90% quantitative, it saves a final, crucial role for human judgment. After the system produces a top-ranked list of stocks, a qualitative analysis is performed. This isn't about gut feelings; it's about a final sanity check on a few key areas.

First is dividend safety. Is the company's payout ratio sustainable? A company like Philip Morris can sustain a very high payout ratio because its business model is incredibly capital-light and generates massive, predictable cash flows. In contrast, a company whose dividend growth consistently outpaces its earnings growth is flashing a major warning sign.

Second is Return on Invested Capital (ROIC), which measures how efficiently management is deploying capital to generate profits. And third is an awareness of cyclicality. A commodity-based business might look incredibly cheap at the bottom of a cycle, but that’s often the most dangerous time to buy. This final human-led review ensures an investor is comfortable with the businesses they own, which is critical for having the conviction to hold on during inevitable market downturns.

Narrator: The single most important takeaway from The Falcon Method is that in investing, a sound and consistently executed process will always triumph over sporadic brilliance or emotional decision-making. The goal is not to find the one perfect stock or to predict the market's next move. The goal is to build a system that puts the odds of success in your favor over the long term and, just as importantly, to develop the discipline to stick with it.

Solyomi uses a powerful poker analogy to illustrate this. You can be dealt a pair of aces—the best possible starting hand—and still lose to a lucky opponent. That’s a bad outcome from a good process. Conversely, you can go all-in with a terrible hand and win by sheer luck. That’s a good outcome from a bad process. A smart player doesn't judge themselves on the outcome of a single hand; they judge themselves on whether they consistently made the right decision. Investing is the same. The challenge the book leaves us with is not just to learn a good process, but to cultivate the character required to follow it, through both winning and losing hands, for years to come.