Warren Buffett Accounting Book: Reading Financial Statements for Value Investing Pdf
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A. Must-know Concepts
1. Interest charge per unit
-> [when contraction] Depression: easier to borrow money -> need up -> spending up -> supply up -> Gdp up
-> unemployment downwardly -> wealth upwardly -> aggrandizement up -> price up -> currency down
-> bubbles on the mode
-> stocks are inexpensive -> purchase stocks
-> [when expansion] High: discourage in borrowing coin -> demand downward -> spending downwards -> supply down -> Gross domestic product down
-> unemployment up -> wealth down -> inflation down -> pric Fantabulous book for rookie investors. Some notes:
A. Must-know Concepts
1. Interest rate
-> [when wrinkle] Low: easier to borrow money -> demand up -> spending upward -> supply upward -> GDP upwards
-> unemployment down -> wealth up -> aggrandizement up -> price up -> currency down
-> bubbles on the mode
-> stocks are cheap -> buy stocks
-> [when expansion] High: discourage in borrowing money -> demand down -> spending down -> supply down -> Gdp down
-> unemployment up -> wealth downward -> inflation down -> cost downwardly -> currency up
-> Buy bonds
2. Inflation
-> more money in the circle -> consume more than -> demand upwards -> spending upwards -> ...
-> more (hidden) revenue enhancement to authorities
-> pay debt (utilize existent inflated currency to pay off nominal debt)
-> stock render down
-> bond interest downward
3. Bonds
-> expert when interest rate is high and|or inflation is low
B. Core principles of value investing
1. Vigilant leadership
- Depression debt: -> low debt-ii-equity (<= 1) -> skillful solvency -> OK in long run
- Large working majuscule -> high current ratio (>= one.v)-> good liquidity -> OK in daily business routine
- Strong and consistent render -> high and consistent ROE (>= 8% in 5-10 years, depends on specific manufacture) -> skilful profitability
- Appropriate direction incentives -> direction board is good and dedicated to business
2. Long-term prospects
- Persistent products: -> exercise technology advance affect somehow on products?
- Tax efficiency: -> Long-term investment cost less tax
3. Stock stability
-> Business organisation: understandable and stable
- Stable book value: -> loftier and consistent owner earning -> EPS growth, FCF growth
- Economic moats: -> durable competitive advantages -> overcome competition in long run
4. Purchase at attractive prices
- wide margin of safety to intrinsic value -> buffer for any mistake in value interpretation and risk assessment
- Low price multiples: depression P/E (<= 15), depression P/B (<= 1.5) (depends on specific industry)-> likely undervalued stocks
- Fix a safe discount rate: -> a kind of run a risk coefficient -> the riskier the investment, the higher the discount rate
-> as well equivalent to the ROI (required charge per unit of return)
-> apply a criterion like bond interest
- Approximate intrinsic value: -> DCF model or Buffet adjusted DCF model
- Sell if stocks break whatever core principle
This volume could have been fabricated even better had the author thrown more light on practical investing decisions to be taken based on analysis of the financials. But it, all the same, is a compelling read.
1. Chapter one – how to look at the stock market
• Value investors believe that stock market fluctuates in the short-term due to emotions and in the long run due to
This book could take been made even improve had the author thrown more than light on practical investing decisions to be taken based on analysis of the financials. But information technology, nevertheless, is a compelling read.
1. Chapter one – how to look at the stock market
• Value investors believe that stock market fluctuates in the brusk-term due to emotions and in the long run due to value
• Bubbling – dotcom chimera in 2000 took identify due to an overly optimistic faith in applied science companies. In 1637, we had the first recording of an economic bubble. Information technology was in the Netherlands when "Tulipmania" occurred. At the summit of the bubble, a tulip bulb was traded at the price of x years' annual income for a worker, far greater than the value of a tulip bulb. Today we might have a laugh at the expense of the poor Dutch people who went into economic ruin, merely as we accept seen twice in the last decade, humanity has learned very little from historic economic bubbles.
• The market doesn't offer value, it offers cost – you determine the value.
• Some investments exercise not generate profit like gold, silver. Their value is based on people'due south belief & perception
two. Affiliate ii – concepts every investor should know –
• Interest charge per unit – its like gravity i.e. information technology's always at that place, having an affect on people & businesses. Interest rate is like the PRICE OF Money.
• The FED determines the interest rate in a similar way. They look at risk and how to adapt financial behavior; even so, they do it on a much larger macro calibration. The FED is non only looking at yous, but at the whole economy. In times of recession, the government wants united states of america to spend more money. It achieves this by lowering the price of money. In other words, it lowers interest rates. This is an incentive to spend more money. When more than money is spent, it will increase consumption, which in turn will atomic number 82 to employment and college wealth in the economy. When interest rates are low, companies can borrow for less. This makes new investments more than attractive, which again leads to more employment and higher wealth. When money is cheap, typically stocks are too. This is the most important fourth dimension to accumulate every bit many shares as y'all tin can. When times are skillful, the government wants it to proceed. They achieve this by trying to avoid a bubble in the market—and so they increase the cost of money, or increment interest rates. When things go expensive, nosotros tend to purchase less. That is not but truthful for TVs and houses; we adapt our financial behavior to all consumption. As with the electronic store that is lending you money for a TV, the gamble and thereby the interest rate is loftier. Citizens really do not want a chimera, and fifty-fifty less a bubble that bursts, because information technology creates instability in the economy. As a successful stock investor, bubbles and involvement rate swings present enormous opportunities. If you want to master the stock market, offset with a firm understanding of interest rates. It's truly the foundation to the unabridged economical cycle and value of everything on the planet. There's a big difference betwixt price and value, and interest rates are the fundamental ingredient to their disparity.
• Inflation (value) – nominal dollar does not adjust for inflation whilst real dollar adjusts the inflation. Regime likes inflation for iii reasons:
• Reason 1 – you start purchasing more than, generating employment & wealth in the guild. Side notation – if you lot earn $i per hour in 1913, & $23.94 in 2013, then a style to say this is nominal $ane in 1913 is equivalent to existent dollar 23.94 in 2013
• Reason two – you are taxed on nominal dollars
• Reason three – debt is issued in nominal terms.
• Bonds - We have also learned that the interest charge per unit was the price of money. So when the interest rate is high, the toll of money is also high. That ways that if you're the lender (or bond purchaser), you will receive more coin from the borrower (or bond seller) if interest rates across the marketplace are generally high. We have too learned that the involvement rate was the price of money. And so when the interest charge per unit is high, the price of money is also high. That ways that if y'all're the lender (or bond purchaser), you will receive more money from the borrower (or bond seller) if interest rates across the market are by and large high.
iii. Affiliate 3 – a brief introduction to financial statements
• Profits/ earnings/ cyberspace income all hateful the same
• If equity is "ain funds", why is it not grouped under "assets"? Because equity does non belong to company, it belongs to shareholders. Hence, it'due south a liability. Equity is referred to as "volume value"
four. Chapter 4 – principles & rules of value investing
• Principle ane – VIGILANT LEADERSHIP
o RULE 1 – Low DEBT – analyse the debt-equity ratio. Ratio below 0.5 is preferable.
o RULE 2 – HIGH Electric current RATIO – electric current ratio of between one.v and two.5 is preferable
o Rule 3 – Stiff AND CONSISTENT RETURN ON EQUITY – ROE ratio is akin to a commencement impression. Cyberspace income/ total equity. In general, look for companies with a consistent ROE of >8% over the past x years. DEBT-EQUITY RATIO IS A METRIC FOR RISK, WHILST ROE RATIO IS A METRIC FOR Render. Both are every bit important
o RULE 4 – APPROPRIATE Direction INCENTIVES – main-amanuensis problem. Yous, as investor, are the chief & the Board of Directors is the agent
• Principle 2 – LONG-TERM PROSPECTS
o Rule one – PERSISTENT PRODUCTS – will engineering science/ net change the way nosotros use the production? In instance of, say Coca Cola, respond is no.
o RULE two – MINIMISE TAXES
• Principle 3 – STOCK STABILITY
o Rule 1 – STABLE BOOK VALUE GROWTH FROM EARNINGS – EPS, ROE, dividend rate, book value, debt-equity, current ratio
o Rule ii – SUSTAINABLE COMPETITIVE Advantage (MOAT) – iii hints of recognizing a moat – presence of intangible assets (patents etc.), depression cost (Walmart), high switching costs or "stickiness" (for eg. – shifting from Microsoft will exist very troublesome for Windows users)
• Principle four – BUY AT Attractive PRICES
o RULE 1 – KEEP A WIDE MARGIN-OF-SAFETY TO INTRINSIC VALUE – MOS is the divergence between Share Price & Intrinsic Value.
o Dominion 2 – LOW Price-TO-EARNINGS RATIO - Since this number is a ratio, nosotros must always remember that the denominator (or number on the lesser of the fraction) is always 1; therefore, a P/E ratio of ten is actually a ten/1 ratio. This means that every 10 dollars of cost towards the stock should give you one dollar of earnings (for ane year). And so if we want to understand this human relationship as a percentage, we need to expect at the inverse of it —or in other words, the Eastward/P ratio. By taking the inverse of the P/Due east, we go a pct yield; for example, the previous situation had a P/E of 10. Therefore 1/x = 10%. That'due south the annual yield. Let's effort information technology once again but with a different P/E ratio. If you lot negotiated a lower price of $800 for the juice stand up and the business however produced the same earnings, you would have a P/Due east of: $800/$100 = 8. Or a return of one/8 = 12.5%. As you can encounter, a depression P/E is preferable to a high P/E. GENERALLY, Buy STOCKS WITH A P/E RATIO OF 15 OR LOWER
o Rule 3 - Depression Toll-TO-BOOK RATIO - Equally equity and volume value are the same, Price to Volume value or P/B also measures how much the investor pays for every $ane of the visitor'due south equity. So let's demonstrate this idea with an instance. Looking at the $38,000 of disinterestedness from the chart above, permit'due south plough it into a P/B ratio. Let's assume that this company is cleaved downwardly into 100 shares. Based on that number, we know that the book value would exist $380 per share (the math is $38,000/100 shares). Nosotros as well need to assume a marketplace price for ane share, so let'southward utilise $570 per share. In order to calculate the P/B ratio, we volition simply carry the following math: P/B = $570/$380 = 1.5. As you tin run across, the ratio has no units. So what does 1.v mean? This ways that if the P/B is ane.v, y'all pay a marketplace price of $i.5 for every $ane of equity on the company's books.
GENERALLY, P/B RATIO OF 1.5 OR Below IS GOOD.
o Rule 4 – SET A SAFE DISCOUNT Rate
o RULE v – BUY UNDERVALUED STOCKS – DETERMINING INTRINSIC VALUE – 2 approaches – Arroyo 1 is Discount Cash Flow calculation. second approach is a variant of the 1st simply it treats stock like a bond
o Dominion half dozen – THE RIGHT TIME TO SELL YOUR STOCKS
v. Chapter 5 – Financial statements
• Prior to 1987, companies did not written report greenbacks flow argument, they reported only P/L & Balance sheet
six. Chapter 6 – income statement in detail
• Revenue – from Primary activities, from secondary activities (other income) & gains (sale of asset gain)
• Expenses – Primary (COGS), secondary (SG&A, other operating expenses), losses (loss on sale of Fixed asset)
• Gross profit aka Margin or markup – measures organization'south efficiency to command straight cost of revenue while simultaneously increasing sales
• Net income from operations aka EBIT
• Gross Profit Margin ratio – gross profit/ revenue
• Operating margin ratio = EBIT/ revenue (considers secondary expenses like SG&A)
• Net income margin ratio = PAT/ revenue (what amount of sales will interpret into Profit)
seven. Balance sheet in detail
• Profitability ratios
o Return on disinterestedness – tells how much visitor has been able to grow the owners' money during the yr
o Render on assets – if company has no debt, ROA = ROE. ROA will always be lower than ROE if company has debt
• Liquidity ratios
o Current ratio – ideally between 1 to one.5. Too high a ratio indicates bad cash direction as cash could be put to better use
o Quick ratio – excludes inventory. Bold nosotros don't sell any inventory, do we yet await to receive more than than we pay over the next 12 months
• Efficiency ratios
o Inventory turnover ratio –
o Debtors turnover
o Creditors turnover
• Solvency ratios
o Debt to equity – below 0.v is good
o Liabilities to equity – another variant of debt-to-equity –below 0.8 is good
8. Greenbacks flow statement in detail
• A stock effect is like a perpetuity loan (never-ending loan)
• To determine if stock issue as a financing mode is good or not, look at the ROE & the Cost-to-book-value (P/BV) & then y'all volition get a fair idea of the effective perpetuity involvement rate
• Every bit a CFO – three options of availing funding – bank loan, bond issue, stock issuance,
• Payout to shareholder options – dividend, treasury stock buy back
• Free cash flow – operating cash flow excluding PPE
• Free-Cash-Catamenia to acquirement ratio – 13.two% indicates that of every 100$ of revenue, 13.2$ is available for the shareholders equally cash. Mostly, at to the lowest degree 5% or higher is good
• Investing-cash-menses to operating-cash-flow ratio
Brodersen and Pysh's volume explores accounting concepts and fiscal statements using Coca Cola as an instance company. The volume focuses on principles the authors derived from following legendary investor Warren Buffett'due south spoken and written words. Buffett's investment style is one of "value investing," which seeks to buy the stock of solidly performing companies when their intrinsic values autumn below their market values. Buffett has written an annual letter of the alphabet to the shareholders of
Objective SummaryBrodersen and Pysh's volume explores accounting concepts and financial statements using Coca Cola as an case company. The volume focuses on principles the authors derived from following legendary investor Warren Buffett'south spoken and written words. Buffett's investment style is one of "value investing," which seeks to buy the stock of solidly performing companies when their intrinsic values autumn below their market values. Buffett has written an annual letter to the shareholders of his visitor, Berkshire Hathaway, every year since 1977. They can be establish hither http://www.berkshirehathaway.com/lett.... Past following Buffett'due south principles, the authors believe they can enjoy to a higher place boilerplate investment returns. These are some of the lessons of this volume.
1. Invest in assets that generate cash menstruum back to you. Precious metals, wine, and art generally do not create consequent cash catamenia. Stocks generally do.
ii. Governments like inflation because (1) it increases current consumption, which generates employment; (ii) taxation by and large occurs on nominal dollars; and (three) debt, of which the government has a lot, is issued in nominal dollars. Inflation is a constant drag on an investor's ability to make returns.
iii. Bonds are preferred over stocks only when inflation is depression and interest rates are loftier.
iv. Warren Buffett invests co-ordinate to four principles:
(1). Vigilant leadership
i. Low debt – a debt-to-equity ratio (debt / equity) < .five is preferred.
2. High current ratio – (current assets / current liabilities) > 1.5 is preferred.
iii. Strong and consequent render on equity – (net income / shareholder's equity) > viii% for the last ten years
4. Appropriate management incentives – Managers are shareholders' agents and should not be compensated simply by salary or brusque-term stock price increases.
(2). Long-term prospects
i. Persistent products – Buffett'south favorite property period is forever, then he prefers products like Coca Cola, trains, banking, existent estate over high tech devices like smartphones and tablets.
ii. Minimize taxes – Hold investments for at to the lowest degree one year, and preferably longer to minimize taxes, which reduces overall return.
(three). Stock stability
i. Stable book value growth from the owner's earnings – a graphing tool on the authors' website has 6 inputs—EPS, ROE, Dividend Charge per unit, Book Value, Debt/Equity, and the Current Ratio—that tin can be graphed for x years to testify stability. The website is: http://www.buffettbooks.com/intellige....
ii. Sustainable competitive reward (moat) – Invest in companies with durable competitive advantages similar brand value or other intangibles, depression-cost structures, and high switching costs or stickiness.
(4). Buy at bonny prices
i. Go on a wide margin of safety to the intrinsic value – your intrinsic value calculation should exist lower than the marketplace price at the time y'all purchase, and the wider the margin the amend
ii. Low price-earnings ratio – generally should exist less than 15
iii. Depression price-to-volume ratio – by and large should be less than 1.five
iv. Set a safety discount rate – should never be less than the ten-year Treasury Bond rate, and should reflect the risk of the business organisation
five. Buy undervalued stocks by determining intrinsic value – use either the Discounted Cash Flow method (using assumptions of free cash flow for 10 years and then into perpetuity, estimated discount rate, and so catechumen to a per share price) or the authors' intrinsic value calculator available at: http://www.buffettsbooks.com/intellig... (using estimated futurity volume value growth based on past alter, and estimated dividends).
vi. Know the correct time to sell your stocks – sell stock that breaks one of the 4 principles, is besides large a pct of your portfolio, or you can get a better render from another investment.
a. Calculate the expected annual return for stocks A and B based on the current marketplace prices.
b. Subtract the cost of upper-case letter gains tax from Stock A.
c. Calculate whether stock A or stock B yields the highest expected annual render based on a given timeframe.
v. Net income margin ratio = net income / acquirement. College is better and there should be a trend of a loftier cyberspace-margin ratio.
6. Interest coverage ratio = income from operations / interest expense. Higher is ameliorate, but a ratio of 5 or greater is generally safe.
seven. Return on equity and return on assets are equal if the visitor has no debt. If you're buying a company with a lot of debt, y'all probably desire to refer to ROA rather than ROE.
eight. Debt-to-disinterestedness ratio = (long-term debt + notes payable) / disinterestedness. A lower ratio signifies a less risky company. Buffett generally does not like a debt-to-equity ratio above .5. Liabilities-to-equity ratio = total liabilities / equity. Information technology is similar merely even more conservative than debt-to-equity ratio, and it should by and large be below .eight.
9. Free greenbacks flow = operating cash flow + net belongings, plant, and equipment. Many value investors believe this figure holds the key to determining the intrinsic value of a business.
10. Complimentary greenbacks flow-to-revenue ratio = (operating cash period + net property, plant, and equipment) / revenue. A higher ratio is better, and information technology should be at least 5%.
11. Accounting information is contained in ten-Ks and ten-Qs. All publicly traded companies are required to generate these reports. Employ the information in these reports to filter companies through the accounting ratios discussed. The ratios are just a starting point and guide. Stock selection is ultimately both science and art.
Subjective Thoughts
Value investors like Buffett, Brodersen, and Pysh implicitly—if non explicitly—refuse the efficient market hypothesis, which states that the market value of stocks reflects all publicly available information. If the efficient market hypothesis is true, individual investors should not be able to consistently outperform the market. Investors may outperform the marketplace in the short run, just they should not wait to exercise so in the long run. Furthermore, individual investors who do outperform the market are either lucky or using insider information. The investing strategy suggested by the efficient marketplace hypothesis is to hold a broad alphabetize of funds and minimize transaction costs to maximize overall returns. This strategy was pioneered by John Bogle of Vanguard based on the academic work of Burton Malkiel, and it has been adopted past countless investors. Buffett himself even famously bet a hedge-fund manager (the supposed cream of the investing crop) that an index fund would outperform a basket of hedge funds that his counterpart to the wager selected. Buffett won the bet. It'south strange to me that Buffett has stated that low cost alphabetize funds are the best investment for 99% of investors under the logic of the efficient marketplace hypothesis, but he himself selects individual stocks and has outperformed the market place during his tenure at Berkshire Hathaway. How exercise we foursquare that circumvolve?
The answer is that Buffett believes himself to be in the 1% or less of people who tin outperform the market, and he has done so since taking the reins at Berkshire Hathaway in 1962. In that location is an open question to what extent he has been able to outperform the market since 2000. Buffett has an incentive to discourage people from analyzing and investing in individual stocks equally it decreases his competition. Simply most people, by definition, are not in the upper echelon of investors. I think the market is largely efficient, and it becomes more and so with improved technology. Arbitrage opportunities, to the extent they appear, vanish at an increasingly rapid pace. Well-nigh people do not have the time or expertise to invest as Buffett does, and they truly are better off investing in low toll index funds. Brodersen's and Pysh's book is simply the tip of the iceberg in terms of the cognition and time required to effort to outperform the market place on the basis of skill rather than luck.
And this book itself is but ok. It seemed repetitive and strangely organized. Affiliate iv, for example, is 84 pages, while Chapter 5 is 10 pages. A petty balance in the scope of capacity would be prissy. Chapter three is a brief introduction to financial statements that are then explored in more detail in Chapters six, seven, and 8. Why non just eliminate Affiliate 3 altogether rather than repeat the aforementioned information? It felt at times as if the authors were stretching to run into a 250 page minimum rather than conveying useful information efficiently. The use of analogies was distracting and overdone. At that place were a few noticeable typos. This book is in need of a strong editor. There is useful data buried in here, but it could be both shorter and more than logically organized. Mike Piper's "Accounting Made Simple" is a smashing instance of how to cut fluff.
I don't personally invest in individual stocks, and I don't intend to start doing so with whatever meaning portion of my total portfolio. I am satisfied with the returns provided past Vanguard's index funds. I'd view any individual stock selections equally more than akin to gambling or a fun hobby than a serious investment strategy. But I don't currently derive whatsoever meaning pleasure from wading through financial statements and estimating the future cash flows of large companies. Information technology sounds more than like a chore than an enticing way to spend an evening. Fortunately, the index funds are out there, and Joel Greenblatt'southward "Little Book that Beats the Marketplace" offers a stock screening strategy with merely slightly more work than alphabetize funds. His website (available here: https://world wide web.magicformulainvesting.com/) prioritizes various financial information and ratios to yield an investment strategy. In terms of the attempt-to-reward ratio, which I e'er consider in life, index funds and Greenblatt's stock screener appeal to me more than the approach from Brodersen, Pysh, and Buffett. Simply, equally I said, less competition from me and people like me should be good news to them.
Revealing Quotes
"As your knowledge increases, your confidence improves and your understanding of truth and facts becomes articulate. Financial educational activity removes the time and impulse chemical element found in novice investors."
"Intrinsic value tin be defined merely: It is the discounted value of the cash that tin can be taken out of a business during its remaining life." – Warren Buffett
"Warren Buffett strongly believes that concentration of your portfolio really diminishes your gamble. He compares this strategy with having Michael Jordan on your squad: would you substitute him because he is scoring all the points?"
"When I am in dubiety as to whether something is an nugget or liability, this is the definition I think of: Can information technology brand money for the visitor?"
"Goodwill just occurs during the acquisition process; it is not something companies can create past themselves."
"When you look at v-year trends on the company's cash menses statement, nothing spells trouble faster than a company that continually raises cash outside of the company's operating activities."
...more ...more than
This book uses bookkeeping statements from real companies and dives into them from the vantage point of a value investor. I love the discussion around key ratios for each of the iii bookkeeping statements, and relative comparing examples to competitors. I'll likely use the latter one-half of this book as a reference going forward. This is a great book for investors new and old.
Actaul examples from a value investors vantage bespeakThis book uses accounting statements from real companies and dives into them from the vantage signal of a value investor. I love the discussion around key ratios for each of the three bookkeeping statements, and relative comparison examples to competitors. I'll likely utilise the latter half of this book as a reference going forward. This is a great book for investors new and old.
...more than
Two authors and basically two parts to this book. The get-go half is an overview of how Warren Buffet invests and looks at companies. What kind of metrics he focuses on, and how he reads financial statements. If yous've followed that topic before, null new hither... I do like to meet when people bear witness the math for their intrinsic value calculations. That's the highlight of the first half.
Second half is all most accounting and financial statements, which for non-account
Pretty skillful volume. Quick read.Two authors and basically two parts to this book. The first half is an overview of how Warren Buffet invests and looks at companies. What kind of metrics he focuses on, and how he reads financial statements. If yous've followed that topic before, nothing new hither... I do like to run into when people show the math for their intrinsic value calculations. That'southward the highlight of the outset one-half.
Second one-half is all nigh accounting and fiscal statements, which for non-accountants, can exist very confusing! Simply - as investors, is likewise very of import. I liked the way they presented the cloth. Just the right amount of depth for me (a beginner). Quick read. I took a lot of notes and will come back to them later.
I'd recommend this book - merely I certainly wouldn't telephone call it a 'must read'.
Misc thoughts... Does Warren Buffet own his own proper noun? Can anyone who wants to, write a book claiming to explain his methods... and just capitalize on Warren'south success? Obviously hundreds of authors accept done so... and I'1000 guessing he isn't giving them permission? Or receiving a cut? Interesting... and perhaps a fiddling kleptomaniacal?
PET PEEVE TIME! - This guys take a website with some 'tools' on information technology... who gives a fuck? I went to the library to read a book - don't fill information technology with links to your website!! I Can'T CLICK ON THEM. And I'm sure equally hell non going to t...y...p...east... them into a browser. Is the website even all the same up? How would I know! Information technology'southward non a blog fellas, don't treat it like one. I know they aren't the only ones, and its probably somewhat common. It'due south just insulting to my intelligence. I know how to use google. I could find your stupid website if I wanted to - but I didn't, I got a volume instead. Don't embarrass yourselves.
On a lighter note - I checked out this book without noting the authors... turns out I used to listen to these guys' podcast. So that was a fun coincidence. The podcast was OK - but far from top notch. Production quality was so-then, and ultimately the topics and guests just weren't cutting it for my tastes. And zero against Stig, only his accent is tough. Maybe stick to the books?
...more
The book is a great read to anyone who has no account expertise but wants to larn how to read s1s 10ks, 10qs.
The volume doesn't become too much in depth in valuation models but they do a great job of giving some bones ratios new investors should look for. I do recall following Benjamin Graham or Warren Buffe
You lot won't necessarily get any ground breaking insight from this book merely it will definitely assistance your central assay of companies. Preston/Stig also have a swell youtube channel and podcast.The book is a bully read to anyone who has no account expertise just wants to learn how to read s1s 10ks, 10qs.
The book doesn't go too much in depth in valuation models just they do a great job of giving some basic ratios new investors should expect for. I practise think following Benjamin Graham or Warren Buffet's ratios to a T is a bad idea. One of the funniest part of this volume is Preston/Stig taking Apple as a blazon stock that Warren Buffet wouldn't invest in. When actually Apple is considered i of Warren Buffet's keen trades of the concluding decade and he is one of the largest owners of Apple stock.
I think developing your own investment thesis/philosophy is the most important thing but no book volition teach you that. Simply this is a peachy intro to corporate finance and few macro things at the start such as ir/bond yields etc.
...more Throughout the book there is a continuous reinforcement of the cautious value investor and when yous read the book and go through the numbers in that location is an understandable reasoning behind the conclusion making. There were quite a few sections through the volume that The Warren Buffett accounting book is ane of the best guides that i have read on reading on financial statements. This is not the type of book that gives you life advice, instead it gives sound fiscal advice that will serve yous for life.
Throughout the book there is a continuous reinforcement of the cautious value investor and when y'all read the volume and go through the numbers there is an understandable reasoning behind the decision making. There were quite a few sections through the book that i highlighted every bit "exercise non forget this".
The volume did reinforce the ii beliefs that i have always had in myself and they are understanding something is important to me and the value of understanding will be the ultimate repayment. Secondly i would never want to be an auditor; no affair how much information technology paid.
If you are like myself a retail investor with no accounting background then this is the book y'all should read. The style is easy to read and the format is practicable in every believable way.
Enjoy and invest for the long term. ...more
Love their podcast. Super helpful and insightful. The book is great for beginners. It explains accounting, FSA, and investing well. Too, it does explain Buffetts approach reasonably well. However, I disagree with their assessment about leverage mostly being bad. In fact the high return from private equity comes from optimal leverage. Also, the book does non do a good job of explaining finding proficient moat. You really need to know the industry and the business model.
St
Love their podcast. Super helpful and insightful. The book is keen for beginners. Information technology explains accounting, FSA, and investing well. Also, it does explain Buffetts arroyo reasonably well. Nevertheless, I disagree with their assessment well-nigh leverage by and large being bad. In fact the high return from private disinterestedness comes from optimal leverage. As well, the book does not do a good job of explaining finding good moat. You really need to know the manufacture and the business model.
However the volume is a great volume for beginner investors. Also, it is a good book for those who merely started studying FSA.
A good attainable read for anyone looking to get into value investing.
An piece of cake to read guide on Warren Buffett'southward accounting methodology - covering how he looks for companies that make up good investments (consistent and increasing earnings, expert management, competitive advantage, etc.). The authors also practice well to explain bones value investing concepts such as the behaviour of the stock market and ownership when the market is "inexpensive" rather than "expensive".A expert accessible read for anyone looking to become into value investing.
...more Great in-depth review of the about important accounting metrics needed for analyzing financial statements. The author goes stride-by-step and does a bang-up job explaining the material.
I am already a big fan The investors podcast and found the book also to be equally great. The language is simple and its uses examples with most every topic to help readers understand the concepts. If that'south not enough, they take likewise have a large online big community to help y'all address all your unanswered queries.
Totally recommended.
Things as ROE, Book Value, P/E, P/B, D/East, ROA and many sorts of stock multiples are distorte I actually like how patient Brodersen is explaining financial statements line-by-line in this volume. He goes beyond of what is easily establish on the cyberspace and grasps what people generally gets incorrect when trying to read financial statements and respond questions effortlessly. Although the book is very informative and well written it falls far from its objective by focusing too much on the analyses of Equity.
Things as ROE, Volume Value, P/E, P/B, D/Eastward, ROA and many sorts of stock multiples are distorted and will only and mainly contribute for investors making bad decisions.
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A very dumbed down version rxplaining all relevant loftier finance concepts necessary for a layman to beginning value investing. The best function is that the advice applies to all markets and is not limited to American markets lone.
Not bad Book for beginners, I enjoyed reading information technology, although I was dislocated in some chapters but overall at present I have better agreement of the stocks and value investment.
Cheers
The author has done good job while explaining the financial statements with respect to Value Investing. I have gone through their educational videos and they are bonus later reading this book.
Explains perfectly accounting, the three fiscal statements and how the connect with each other.
Very well written book that have you pace by step to understand financial statements. I highly recommend this book for people with basics.
The book was written in a convoluted fashion and I institute that I had to reorganize the material to make sense of it.
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Source: https://www.goodreads.com/en/book/show/22103415