Sherlock and Watson theorize on the identity of the owner of the cane that has been left in the office by an unknown visitor.
Wowing Watson with his fabulous powers of observation, Holmes predicts the appearance of James Mortimer, owner of the found object.
Entering the office and unveiling an 18th century manuscript, Mortimer recounts the myth of the lecherous Hugo Baskerville
Mortimer reports, the Baskerville line has been plagued by a mysterious and supernatural black hound. The recent death of Sir Charles Baskerville has rekindled suspicions and fears. The next of kin, the duo finds out, has arrived in London to take up his post at Baskerville Hall, but he has already been intimidated by an anonymous note of warning and, strangely enough, the theft of a shoe.
Agreeing to take the case, Holmes and Watson quickly discover that Sir Henry Baskerville is being trailed in London by a mysterious bearded stranger, and they speculate as to whether the ghost be friend or foe.
Holmes, however, announces that he is too busy in London to accompany Mortimer and Sir Henry to Devonshire to get to the bottom of the case, and he sends Dr. Watson to be his eyes and ears, insisting that he report back regularly.