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Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage
With an insider's view of the mind of the master, Mary Buffett and David Clark have written a simple, easy-to-follow guide for reading financial statements from Warren Buffett's successful perspective.
Buffett and Clark clearly outline Warren Buffett's strategies in a way that will appeal to newcomers and seasoned Buffettologists alike. Inspired by the seminal work of Buffett's mentor, Benjamin Graham ( The Interpretation of Financial Statements , 1937), this book presents Buffett's interpretation of financial statements with anecdotes and quotes from the master investor himself.
Potential investors will
-Buffett's time-tested dos and don'ts for interpreting an income statement and balance sheet
-Why high research and development costs can kill a great business
-How much debt Buffett thinks a company can carry before it becomes too dangerous to touch
-The financial ratios and calculations that Buffett uses to identify the company with a durable competitive advantage—which he believes makes for the winning long-term investment
-How Buffett uses financial statements to value a company
-What kinds of companies Warren stays away from no matter how cheap their selling price
Once readers complete and master Buffett's simple financial calculations and methods for interpreting a company's financial statement, they'll be well on their way to identifying which companies are going to be tomorrow's winners—and which will be the losers they should avoid at all costs.
Destined to become a classic in the world of investment books, Warren Buffett and the Interpretation of Financial Statements is the perfect companion volume to The New Buffettology and The Tao of Warren Buffett .
Buffett and Clark clearly outline Warren Buffett's strategies in a way that will appeal to newcomers and seasoned Buffettologists alike. Inspired by the seminal work of Buffett's mentor, Benjamin Graham ( The Interpretation of Financial Statements , 1937), this book presents Buffett's interpretation of financial statements with anecdotes and quotes from the master investor himself.
Potential investors will
-Buffett's time-tested dos and don'ts for interpreting an income statement and balance sheet
-Why high research and development costs can kill a great business
-How much debt Buffett thinks a company can carry before it becomes too dangerous to touch
-The financial ratios and calculations that Buffett uses to identify the company with a durable competitive advantage—which he believes makes for the winning long-term investment
-How Buffett uses financial statements to value a company
-What kinds of companies Warren stays away from no matter how cheap their selling price
Once readers complete and master Buffett's simple financial calculations and methods for interpreting a company's financial statement, they'll be well on their way to identifying which companies are going to be tomorrow's winners—and which will be the losers they should avoid at all costs.
Destined to become a classic in the world of investment books, Warren Buffett and the Interpretation of Financial Statements is the perfect companion volume to The New Buffettology and The Tao of Warren Buffett .
180 pages, Hardcover
First published January 1, 2008
About the author
Mary Buffett
33 books118 followersMary Buffett is a best-selling author, international speaker, entrepreneur, political and environmental activist. Ms. Buffett’s first book Buffettology, co-written with David Clark in 1997, was an immediate New York Times and Business Week best-seller. Since that time, all seven of Ms. Buffett’s books have been best-sellers.
Ms. Buffett appears regularly on television as one of the top finance experts in America including CNN Business News, CNBC’s Squawk Box, Power Lunch with Bill Griffith, Bloomberg News, Fox Business News, MSNBC’s Headliners and Legends and BBC News.
She has appeared around the world as a principal speaker at some of the world’s most prestigious organizations including recent appearances with Laura Bush, Colin Powell and other prominent achievers filling arenas around the country as part of the Get Motivated seminar series.
Ms. Buffett has worked successfully in a wide range of businesses including extensive work as a consultant to a number of Fortune 500 companies including AOL Time Warner, as an executive at Columbia Records and as co-founder or her own music and editorial post-production companies, Independent Sound and Superior Assembly, working with many of the music industry’s biggest stars. She has also taught Business and Finance at several California State Universities, including UCLA.
Mary is the proud mother of three successful children and lives in California.
Ms. Buffett appears regularly on television as one of the top finance experts in America including CNN Business News, CNBC’s Squawk Box, Power Lunch with Bill Griffith, Bloomberg News, Fox Business News, MSNBC’s Headliners and Legends and BBC News.
She has appeared around the world as a principal speaker at some of the world’s most prestigious organizations including recent appearances with Laura Bush, Colin Powell and other prominent achievers filling arenas around the country as part of the Get Motivated seminar series.
Ms. Buffett has worked successfully in a wide range of businesses including extensive work as a consultant to a number of Fortune 500 companies including AOL Time Warner, as an executive at Columbia Records and as co-founder or her own music and editorial post-production companies, Independent Sound and Superior Assembly, working with many of the music industry’s biggest stars. She has also taught Business and Finance at several California State Universities, including UCLA.
Mary is the proud mother of three successful children and lives in California.
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Displaying 1 - 30 of 394 reviews
January 28, 2012
I am an accounting and finance professional with 10 years' experience in advising clients on cross-border merger & acquisition transactions, international tax structuring and business model optimizations. I read companies' financial statements regularly to gain understanding of a company's business operation, source of revenue, financing situation, cash flow, global effective tax rate, and etc. I wanted to read a book about interpretation of financial statements from investors' perspective, so I picked up "Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage".
This book is written by Warren Buffett's former daughter-in-law Mary Buffett and a successful Buffettologist David Clark. The authors have written a simple guide for reading financial statements from Warren Buffett's successful perspective. With 57 short chapters, the book illustrated what Buffett would look at when buying a business. He looks at the company's pre-tax earnings and asks if the purchase is a good deal relative to the economic strength of the company's underlying economics and the price being asked for the business.
This book is an easy read to learn Buffet's time-tested dos and don'ts for interpreting an income statement and balance sheet, how much debt Buffett thinks a company can carry before it becomes too dangerous to touch, the financial ratios and calculations that Buffett uses to identify the company with a durable competitive advantage, and what kind of companies Buffet stays away from no matter how cheap the price is.
Overall, I think this is a good book. I enjoyed this book because it introduced to me Warren Buffett's methodology for reading financial statements. If you aren't experienced with reading financial statements, I would highly recommend this book as a great place to start.
This book is written by Warren Buffett's former daughter-in-law Mary Buffett and a successful Buffettologist David Clark. The authors have written a simple guide for reading financial statements from Warren Buffett's successful perspective. With 57 short chapters, the book illustrated what Buffett would look at when buying a business. He looks at the company's pre-tax earnings and asks if the purchase is a good deal relative to the economic strength of the company's underlying economics and the price being asked for the business.
This book is an easy read to learn Buffet's time-tested dos and don'ts for interpreting an income statement and balance sheet, how much debt Buffett thinks a company can carry before it becomes too dangerous to touch, the financial ratios and calculations that Buffett uses to identify the company with a durable competitive advantage, and what kind of companies Buffet stays away from no matter how cheap the price is.
Overall, I think this is a good book. I enjoyed this book because it introduced to me Warren Buffett's methodology for reading financial statements. If you aren't experienced with reading financial statements, I would highly recommend this book as a great place to start.
November 12, 2014
This was one of the most redundant books that I've ever read. If I ever hear "durable competitive advantage" again or see the word "superrich", I will literally scream. She used the terms at least once a page. Near the end of the book, the author had the audacity to say "at the risk of being redundant" to express yet another oversimplified concept. This was unintentionally hysterical given that her redundancy was noticeable on page 5. Not only was this book redundant, it was poorly written. The sentences were incomplete and routinely ended in prepositions. There were also numerous instances in which she had reused paragraphs in later chapters, almost verbatim. In addition, there were annoyingly simplistic quips similar to the following - "Warren understands the secret to making money is to not spend money." Seriously?!?! I want my money back.
To be sure, there were a few interesting nuggets of information with regard to Buffett's acceptable tolerances for various formulas. I would like to understand more about Buffett's approach to fundamental analysis. However, one thing is certain, I will never read another book by his former daughter-in-law again.
To be sure, there were a few interesting nuggets of information with regard to Buffett's acceptable tolerances for various formulas. I would like to understand more about Buffett's approach to fundamental analysis. However, one thing is certain, I will never read another book by his former daughter-in-law again.
August 3, 2010
Mary Buffett seems like a ghastly parasite - capitalising (and no doubt making lots of money) from her surname, obtained during a 12 year marriage to Warren Buffett's son. Why this should make her an expert on his investment process is not clear.
Despite these grave and continuous reservations on my part, and her persistent use of "Warren" this and "Warren" that, this book is fairly useful for individual investors who want a crash course in basic accounting.
Despite these grave and continuous reservations on my part, and her persistent use of "Warren" this and "Warren" that, this book is fairly useful for individual investors who want a crash course in basic accounting.
March 4, 2018
It presents fundamental knowledge on finance and some investing advice from Warren's perspective.
Basically, it's pretty much like the book Financial Intelligence by Karen Berman, but it also digs deeper into analyzing every items from the income statement, balance sheet and cash flow statement.
Some interesting summary:
I. Some insights:
1. Should invest in a company by its real value in financial growth aspects (value investing). Choose companies with consistently competitive advantages and buy their stocks with a low price.
=> Analyze their 10K documents to find out their financial states over the years.
2. Choose a company: provide a unique or special product/service, manufacture with low input expenses, or be in a always-on-high-demand product market (familiar product market).
3. Hold those growing stocks as long as possible, because as soon as you sell those stocks or pay dividends, you'll be taxed!!
II. Analysis:
1. Income statement:
- Look at gross profit margin over the years to see if a company is making money consistently.
- Hard cost (fixed expense): SG&A expense, R&D expense, ... should be as low as possible.
High SGA expense often means that the company is in a highly competitive market, which might not be good in making profit consistently in long term.
Companies produce unique or special products often have very high R&D expense. Consider this expense carefully to see if it'll bring competitive advantages in long term.
- Depreciation: non-cash expense and not directly affect revenue but should be always counted in.
- Look at income tax, to see if the company is honest about its income statement.
- The very important ratio: net profit margin = net income / revenue, reflects the business status of a company. Should look at this number over the years to see how consistent it is.
- Earning per share EPS = net income / total outstanding shares (all the stocks in the market)
The consistency of EPS growth is a good index to look at. But should look at it in regarding of net profit margin. For example, in some cases, company stocks are re-purchased (a.k.a treasury stocks), decreasing the outstanding shares, EPS would increase but not net income.
2. Balance sheet:
- Working assets (current assets) show a lot about the company health. The cash cycle/ the working asset cycle: cash & cash equivalence -> inventory -> A/R -> cash again.
- Remember cash is king! It shows how healthy the business is.
- Related factors worth taking into consideration: working capital = working assets - short term debt => the greater the better. Also current ratio = working assets / short term debt => the greater the better (in general). However, some companies with very good business may buy back stocks to increase EPS, so this ratio may be be high.
- Fixed assets (long term assets): includes PPE, goodwill (only count if buying from other companies, not from internally development), other intangible assets (patents, IP), long term investment, prepaid assets (expenses) and tax return.
- ROA (return on asset) = net income / assets is a good index, too.
- Debt is a financial leverage, but in general, the less the better, and having long -term debt is better than having short term debt.
- Minor shareholders ' rights are also noted in debt department. When a company holds at least 80% of another company, it can add up entire assets and debts from that company into its balance sheet and deduct an amount as minor shareholder rights to balance the balance sheet.
- Important ratio: debt-2-equity (after adjustment from treasury stocks)=> the smaller the better.
This ratio shows how much debt the business owes. For example, the ratio 0.8 means for each 1USD, it has to pay 8 cents for debt.
- Equity (a.k.a book value or net worth) includes: stocks (prefered stocks, common stocks), share premium account, treasury stocks and retained earnings and other capitals.
- In general, preferred stocks is worse than common stocks. The company is obliged to pay dividends at a predefined rate and also can not declare as a loss to have exemption from tax like a debt. => should avoid it if possible.
- Net profit can be used to pay dividends, buy treasury stocks or to re-invest in the business.
So retained earnings = net profit - treasury stocks - dividends. This number is accrual over years.
=> Should retain as much as possible.
- Treasury stocks can increase ROE (return on equity = net income / equity) because treasury stocks are noted as a negative number. This kind of stock can't have election rights or be payed dividends.
=> In general, buying treasury stocks is a good index that the company is having good business.
=> ROE the greater the better, it means that the company is using retained earnings effectively. And for long term, this will increase the intrinsic value of the company, and then reflect by the growth of stock price.
3. Cash flow statement:
- Total cash from operating activities: net income, depreciation/amortization
- Total cash from investing activities: capital expenditure, other investments
- Total cash from financing activities: dividends, selling/buying shares (stocks), selling/buying debt (bonds)
=> Cash shows the real health of a business.
Basically, it's pretty much like the book Financial Intelligence by Karen Berman, but it also digs deeper into analyzing every items from the income statement, balance sheet and cash flow statement.
Some interesting summary:
I. Some insights:
1. Should invest in a company by its real value in financial growth aspects (value investing). Choose companies with consistently competitive advantages and buy their stocks with a low price.
=> Analyze their 10K documents to find out their financial states over the years.
2. Choose a company: provide a unique or special product/service, manufacture with low input expenses, or be in a always-on-high-demand product market (familiar product market).
3. Hold those growing stocks as long as possible, because as soon as you sell those stocks or pay dividends, you'll be taxed!!
II. Analysis:
1. Income statement:
- Look at gross profit margin over the years to see if a company is making money consistently.
- Hard cost (fixed expense): SG&A expense, R&D expense, ... should be as low as possible.
High SGA expense often means that the company is in a highly competitive market, which might not be good in making profit consistently in long term.
Companies produce unique or special products often have very high R&D expense. Consider this expense carefully to see if it'll bring competitive advantages in long term.
- Depreciation: non-cash expense and not directly affect revenue but should be always counted in.
- Look at income tax, to see if the company is honest about its income statement.
- The very important ratio: net profit margin = net income / revenue, reflects the business status of a company. Should look at this number over the years to see how consistent it is.
- Earning per share EPS = net income / total outstanding shares (all the stocks in the market)
The consistency of EPS growth is a good index to look at. But should look at it in regarding of net profit margin. For example, in some cases, company stocks are re-purchased (a.k.a treasury stocks), decreasing the outstanding shares, EPS would increase but not net income.
2. Balance sheet:
- Working assets (current assets) show a lot about the company health. The cash cycle/ the working asset cycle: cash & cash equivalence -> inventory -> A/R -> cash again.
- Remember cash is king! It shows how healthy the business is.
- Related factors worth taking into consideration: working capital = working assets - short term debt => the greater the better. Also current ratio = working assets / short term debt => the greater the better (in general). However, some companies with very good business may buy back stocks to increase EPS, so this ratio may be be high.
- Fixed assets (long term assets): includes PPE, goodwill (only count if buying from other companies, not from internally development), other intangible assets (patents, IP), long term investment, prepaid assets (expenses) and tax return.
- ROA (return on asset) = net income / assets is a good index, too.
- Debt is a financial leverage, but in general, the less the better, and having long -term debt is better than having short term debt.
- Minor shareholders ' rights are also noted in debt department. When a company holds at least 80% of another company, it can add up entire assets and debts from that company into its balance sheet and deduct an amount as minor shareholder rights to balance the balance sheet.
- Important ratio: debt-2-equity (after adjustment from treasury stocks)=> the smaller the better.
This ratio shows how much debt the business owes. For example, the ratio 0.8 means for each 1USD, it has to pay 8 cents for debt.
- Equity (a.k.a book value or net worth) includes: stocks (prefered stocks, common stocks), share premium account, treasury stocks and retained earnings and other capitals.
- In general, preferred stocks is worse than common stocks. The company is obliged to pay dividends at a predefined rate and also can not declare as a loss to have exemption from tax like a debt. => should avoid it if possible.
- Net profit can be used to pay dividends, buy treasury stocks or to re-invest in the business.
So retained earnings = net profit - treasury stocks - dividends. This number is accrual over years.
=> Should retain as much as possible.
- Treasury stocks can increase ROE (return on equity = net income / equity) because treasury stocks are noted as a negative number. This kind of stock can't have election rights or be payed dividends.
=> In general, buying treasury stocks is a good index that the company is having good business.
=> ROE the greater the better, it means that the company is using retained earnings effectively. And for long term, this will increase the intrinsic value of the company, and then reflect by the growth of stock price.
3. Cash flow statement:
- Total cash from operating activities: net income, depreciation/amortization
- Total cash from investing activities: capital expenditure, other investments
- Total cash from financing activities: dividends, selling/buying shares (stocks), selling/buying debt (bonds)
=> Cash shows the real health of a business.
June 15, 2021
TAKEAWAY: NEXT TIME I WILL WEAR GOGGLES
YOU CAN TELL THAT THE AUTHOR KNOWS A LOT ABOUT THE STOCK MARKET BECAUSE SHE KNOWS WARREN BUFFETT, WHO BECAME FAMOUS WHEN HE INVENTED THE STOCK MARKET IN 1959. THIS IS WHY SHE MENTIONS WARREN BUFFETT FOUR TIMES PER PAGE, WHICH MAKES THE BOOK FOUR TIMES AS GOOD AS IF SHE MENTIONED HIM ONE TIME PER PAGE. ALTOGETHER THE AUTHOR’S CREDENTIALS ARE IMPRESSIVE, ALTHOUGH I WOULD KNOW WARREN BUFFETT TOO IF HIS WIFE WOULD STOP MACING ME EVERY TIME I TRY TO SLIP MY RESUME UNDER THEIR BEDROOM DOOR.
FROM THIS BOOK I LEARNED THAT IF A COMPANY’S BALANCE SHEET SAYS IT IS MAKING A LOT OF MONEY AND SPENDING NO MONEY, THEN THAT IS GOOD, BUT IF THE BALANCE SHEET SAYS THAT THE COMPANY IS SPENDING A LOT OF MONEY AND MAKING NO MONEY, THEN THAT IS BAD. I USED THIS ADVICE TO BUY FIVE THOUSAND SHARES OF BITCOIN AND I CAN FINALLY AFFORD MY OWN CAVE BECAUSE I AM VERY RICH NOW. HOWEVER I AM ONLY GIVING THIS BOOK THREE OUT OF FIVE STARS BECAUSE TRUE WEALTH COMES FROM WITHIN.
RATINGS:
TASTE - 4/5
TEXTURE - 2/5
MOUTHFEEL - 3/5
BOOK - 4/5
FINAL SCORE - 3/5
YOU CAN TELL THAT THE AUTHOR KNOWS A LOT ABOUT THE STOCK MARKET BECAUSE SHE KNOWS WARREN BUFFETT, WHO BECAME FAMOUS WHEN HE INVENTED THE STOCK MARKET IN 1959. THIS IS WHY SHE MENTIONS WARREN BUFFETT FOUR TIMES PER PAGE, WHICH MAKES THE BOOK FOUR TIMES AS GOOD AS IF SHE MENTIONED HIM ONE TIME PER PAGE. ALTOGETHER THE AUTHOR’S CREDENTIALS ARE IMPRESSIVE, ALTHOUGH I WOULD KNOW WARREN BUFFETT TOO IF HIS WIFE WOULD STOP MACING ME EVERY TIME I TRY TO SLIP MY RESUME UNDER THEIR BEDROOM DOOR.
FROM THIS BOOK I LEARNED THAT IF A COMPANY’S BALANCE SHEET SAYS IT IS MAKING A LOT OF MONEY AND SPENDING NO MONEY, THEN THAT IS GOOD, BUT IF THE BALANCE SHEET SAYS THAT THE COMPANY IS SPENDING A LOT OF MONEY AND MAKING NO MONEY, THEN THAT IS BAD. I USED THIS ADVICE TO BUY FIVE THOUSAND SHARES OF BITCOIN AND I CAN FINALLY AFFORD MY OWN CAVE BECAUSE I AM VERY RICH NOW. HOWEVER I AM ONLY GIVING THIS BOOK THREE OUT OF FIVE STARS BECAUSE TRUE WEALTH COMES FROM WITHIN.
RATINGS:
TASTE - 4/5
TEXTURE - 2/5
MOUTHFEEL - 3/5
BOOK - 4/5
FINAL SCORE - 3/5
February 24, 2016
Simplistic to the point of being insulting (they even have a chapter devoted to "proving" that the lower price you pay, the higher your yield), redundant and annoying in the frequency of use of phrases "Warren says", "Warren does" and "Warren thinks" -- it reads like a true pamphlet from a sect of zealots.
Most of the book gives basic definitions of accounting terms with some discussion of what to look for while identifying competitive advantage. There isn't much advice on actual valuations and investing strategy itself - and this is a good thing because where it is present, it is terrible and limited to platitudes such as "don't buy at the height of the bull market." It is ironic that the authors are so dismissive of Graham, and one has to wonder how much investing they have done themselves for otherwise they would know, as Graham taught, that the greatest obstacles to solid returns are psychological and the kind of advice given in the book not easily applicable to real life situations.
In any case, in the world of finance, one should be extremely wary of people he hears using words like "sure thing" or "make you superrich" - as this book does on every other page. Picking companies with competitive advantages seems easy when shown retrospectively on spectacular successes such as Coca-Cola. However, working without the hindsight advantage is much harder. Indeed, one of the examples in the book compares Apple and Microsoft and applauds MS's much higher gross margins. We all know how that "sure thing" worked out in the end.
Most of the book gives basic definitions of accounting terms with some discussion of what to look for while identifying competitive advantage. There isn't much advice on actual valuations and investing strategy itself - and this is a good thing because where it is present, it is terrible and limited to platitudes such as "don't buy at the height of the bull market." It is ironic that the authors are so dismissive of Graham, and one has to wonder how much investing they have done themselves for otherwise they would know, as Graham taught, that the greatest obstacles to solid returns are psychological and the kind of advice given in the book not easily applicable to real life situations.
In any case, in the world of finance, one should be extremely wary of people he hears using words like "sure thing" or "make you superrich" - as this book does on every other page. Picking companies with competitive advantages seems easy when shown retrospectively on spectacular successes such as Coca-Cola. However, working without the hindsight advantage is much harder. Indeed, one of the examples in the book compares Apple and Microsoft and applauds MS's much higher gross margins. We all know how that "sure thing" worked out in the end.
August 1, 2022
Warren Buffett'ın odaklı yatırım olarak tabir edilen yatırım stratejisini finansal tablolar üzerinden nasıl kurduğunu tane tane çok basit bir şekilde bu kitap sayesinde anlayabiliyorsunuz. Bütün bu sayılar arasında aradığı tek bir şey var: "sürekli rekabet üstünlüğü". Buna sahip olan şirketleri buluyor ve bu üstünlükleri devam ettiği müddetçe bırakmıyor. Bu kadar basit. :)
Warren Buffet'ın analiz sürecine bakınca yaptıkları çok basit geliyor. Yani herkes yapabilir bunda ne var diyorsun. Ama kimse uygulamıyor (ya da uygulayamıyor). Niye? Bu kısmı davranışsal ekonomiye giriyor diye düşünüyorum. O konuda da listemde kitaplar var. O kitaplarla ilgili konuşurken bu konulara değiniriz.
Finansal okuryazarlık kapsamında okuduğum 4. kitabım. Kafam şimdiden çorba oldu. 😬😬 Arada üzerlerinden geçmekte fayda olacak diye düşünüyorum. Bunu “Warren Buffett Tarzı”ndan önce okumakta fayda var. Hem daha kolay okunur bir kitap hem de orada geçen hesap kitapların anlaşılmasına da yardımı dokunacaktır. (Yani umarım, daha dönüp bakmadım.)
Çevirmenimize -kendisi ekonomist bu arada!- özellikle değinmeden olmaz! Ergün Unutmaz, Amerika'daki finansal tabloları bizdeki karşılıklarına göre yeniden düzenlemiş. Bölümlerdeki dipnotlarla okuyucunun kaybolmasının da önüne geçmiş. Çok beğendim. Hatta değerleme ile ilgili iki kitap daha sipariş etmiştim. Onlar da böyle çevrilmiş olsa ne güzel olur diyordum ki onları da kendisi çevirmiş. :) Türk finansal okuryazarlığına yapmış olduğu katkılardan dolayı kendisine teşekkür ediyorum. Gözüm kestiğinde o kitaplarla da başlayacağım.
Bir iki alıntı bırakayım -ytd,
Warren Buffet'ın analiz sürecine bakınca yaptıkları çok basit geliyor. Yani herkes yapabilir bunda ne var diyorsun. Ama kimse uygulamıyor (ya da uygulayamıyor). Niye? Bu kısmı davranışsal ekonomiye giriyor diye düşünüyorum. O konuda da listemde kitaplar var. O kitaplarla ilgili konuşurken bu konulara değiniriz.
Finansal okuryazarlık kapsamında okuduğum 4. kitabım. Kafam şimdiden çorba oldu. 😬😬 Arada üzerlerinden geçmekte fayda olacak diye düşünüyorum. Bunu “Warren Buffett Tarzı”ndan önce okumakta fayda var. Hem daha kolay okunur bir kitap hem de orada geçen hesap kitapların anlaşılmasına da yardımı dokunacaktır. (Yani umarım, daha dönüp bakmadım.)
Çevirmenimize -kendisi ekonomist bu arada!- özellikle değinmeden olmaz! Ergün Unutmaz, Amerika'daki finansal tabloları bizdeki karşılıklarına göre yeniden düzenlemiş. Bölümlerdeki dipnotlarla okuyucunun kaybolmasının da önüne geçmiş. Çok beğendim. Hatta değerleme ile ilgili iki kitap daha sipariş etmiştim. Onlar da böyle çevrilmiş olsa ne güzel olur diyordum ki onları da kendisi çevirmiş. :) Türk finansal okuryazarlığına yapmış olduğu katkılardan dolayı kendisine teşekkür ediyorum. Gözüm kestiğinde o kitaplarla da başlayacağım.
Bir iki alıntı bırakayım -ytd,
Brüt kâr marjı testi her zaman başarılı olmasa da inceleme altındaki şirketin bir tür sürekli rekabet üstünlüğüne sahip olup olmadığını görmek için öncu göstergelerden birisidir. Warren ısrarla 'sürekli' kelimesini vurgular ve güvenli tarafta kalmak için yıllık brüt kâr marjını son 10 yıl için izleyerek burada bir 'istikrar' olduğundan emin olmalıyız. Warren bilmektedir ki, sürekli rekabet üstünlüğüne sahip şirketler ararken esas mesele 'istikrar'dır. (62)
O hâlde bu şirketleri ne zaman alırsınız? Yeni başlayanlar için en iyi zaman ayı piyasalarıdır.' Her ne kadar diğer ayı piyasası indirimleri"ne göre hâlâ yüksek fiyatlı gibi görünseler de uzun vadede aslında iyi bir fırsattırlar. Ara sıra da sürekli rekabet üstünlüğüne sahip olan bir şirket bile çuvallayabilir ve aptalca şeyler yapabilir. Bu da doğal olarak o şirketin hisselerinin fiyatını kısa vadede aşağı sürükler. New Coke'u düşünün. Warren şöyle söylemişti: Harika bir alım fırsatı kendisini muhteşem bir işletme bir kerelik ve çözülebilir bir sorunla karşılaştığında gösterebilir. Buradaki anahtar, sorunun çözülebilir olmasıdır.” (242)
Peki ne zaman bu tür süper işletmelerden uzak durmak istersiniz? Boğa piyasasının tepe yaptığı dönemlerde ve bu tür süper işletmeler tarihi olarak yüksek Fiyat/Kazanç oranları üzerinden işlem gördüğünde." Sürekli rekabet üstünlüğünden faydalanan bir şirket dahi yatırımcılar girişte çok yüksek bir fiyat ödediklerinde kendisini vasat sonuçlar üretmekten çekip çıkaramaz. (243)
April 11, 2020
Although the words were poorly written, the book concisely introduces basic accounting concept and W. Buffet’s methodology. Highly recommend for people with no accounting/financial background who wants to invest in stocks and know how to generate investing ideas.
Warren Buffet said: “Some men read Playboy. I read annual reports”. Here are what he looks at in the financial statements when searching for the company with a durable competitive advantage – also called “equity bond”.
Getting a small pot is not how investors get rich and if it is not a sure thing, Warren is not interested. There are 2 concepts to invest here:
A. Selling a unique service – that own a piece of the consumer’s mind (better margin than normal products): doesn’t have to spend a lot of money on redesigning its products nor a fortune building a production plant and warehousing. E.g., Coca cola, Pepsi, Wrigley, Hershey, Budweiser, Coors, Kraft, The Washington Post, P&G, Philip Morris
But not invest in: Salomon Brothers
B. Being both the low-cost buyer and seller of a product or service that the public has an ongoing need for: best price in town – consumer’s story of where to shop. The increase in volume more than the decrease in margins. E.g., Wal-Mart, Costco, Nebraska, Burlington Railway
IS:
1. Consistently higher GPM: search for long-term growth. E.g., higher than 40% over 10 years
lower than 20% indicate a fiercely competitive industry
2. Consistently low SGA expenses/ gross profit: <30% or 30%-80%
So not invest in GM, Ford
3. Research& development: stay away from it
So not invest in Intel
4. Lower depreciation costs/gross profit: <10%
5. Interest expense: <15% operating income. 2 types of companies with high interest payments:
Fiercely competitive industry -> large capital expenditures are required for it to stay competitive
When an excellent business economics was bought in a leveraged buyout
6. G/L on sale of assets and other: should be removed from any calculation
7. NI: historical upward trend. Having financial disasters is not how one gets rich.
8. EPS: booms and busts EPS will make wild price swing in shares and make illusions for traditional value investors.
BS: Two biggest weak links in a company: liquor & leverage
1. Cash: is king when troubled times hit, so if we have it when our competitors don’t, we get the rule ongoing business.
Full of cash when just sold a business or ton of bonds may not be a good thing.
2. Inventory: will the market change so the products become obsolete? Inventory/COGS increase together is a good thing. No one ever got rich going bust.
3. Receivables: Consistently net receivables/ gross sale and should lower than competitors.
4. Many companies with durable competitive advantage have current ratios less than 1 because of their great earning power.
5. PP&E: not having them can be a good thing. E.g., Wrigley
6. Goodwill: If the goodwill account stays the same year after year and the company made some acquisitions, the company is paying under book value for a business. Business that benefit from some kind of durable competitive advantage almost never sell for below their book value.
7. Intangible assets: measuring the unmeasurable. E.g., Coca Cola, McDonald’s, Wal-Mart, Pepsi.
8. Long-term investments: tell about the investment mindset of top management.
Warren bought a controlling interest, stopped paying dividend and went and bought an insurance company. Then he took the assets of the insurance company and went on shopping spree for companies with a durable competitive advantage.
9. ROA: consider cost of entry into business, sometimes more can actually mean less over the long-term. Coca Cola (12%) vs Moody’s (43%)
10. Short-term debt: the smartest and safest way to make money in banking is to borrow it long-term and lend it long-term. E.g., Stable conservative bank Wells Fargo vs go-go aggressive bank BoA
11. Long-term debt: on any given year the company should have sufficient yearly net earnings to pay off all of its long-term debt within three-year earnings period.
12. D/E: below 0.8, the lower the better
13. Preferred stock: expensive money, companies like to stay away from it if they can.
14. Treasury stock: presence treasury stock and a history of buying back shares.
CF: “there is a huge difference between the business that grows and requires lots of capital to do so and the business that grows and doesn’t require capital” – W. Buffet
1. CAPEX: consistently using less than 25% of its net earnings (50% is also just ok)
2. Stock buybacks: tax-free way to increase shareholder wealth
So not invest in telephones industry
Warren Buffet said: “Some men read Playboy. I read annual reports”. Here are what he looks at in the financial statements when searching for the company with a durable competitive advantage – also called “equity bond”.
Getting a small pot is not how investors get rich and if it is not a sure thing, Warren is not interested. There are 2 concepts to invest here:
A. Selling a unique service – that own a piece of the consumer’s mind (better margin than normal products): doesn’t have to spend a lot of money on redesigning its products nor a fortune building a production plant and warehousing. E.g., Coca cola, Pepsi, Wrigley, Hershey, Budweiser, Coors, Kraft, The Washington Post, P&G, Philip Morris
But not invest in: Salomon Brothers
B. Being both the low-cost buyer and seller of a product or service that the public has an ongoing need for: best price in town – consumer’s story of where to shop. The increase in volume more than the decrease in margins. E.g., Wal-Mart, Costco, Nebraska, Burlington Railway
IS:
1. Consistently higher GPM: search for long-term growth. E.g., higher than 40% over 10 years
lower than 20% indicate a fiercely competitive industry
2. Consistently low SGA expenses/ gross profit: <30% or 30%-80%
So not invest in GM, Ford
3. Research& development: stay away from it
So not invest in Intel
4. Lower depreciation costs/gross profit: <10%
5. Interest expense: <15% operating income. 2 types of companies with high interest payments:
Fiercely competitive industry -> large capital expenditures are required for it to stay competitive
When an excellent business economics was bought in a leveraged buyout
6. G/L on sale of assets and other: should be removed from any calculation
7. NI: historical upward trend. Having financial disasters is not how one gets rich.
8. EPS: booms and busts EPS will make wild price swing in shares and make illusions for traditional value investors.
BS: Two biggest weak links in a company: liquor & leverage
1. Cash: is king when troubled times hit, so if we have it when our competitors don’t, we get the rule ongoing business.
Full of cash when just sold a business or ton of bonds may not be a good thing.
2. Inventory: will the market change so the products become obsolete? Inventory/COGS increase together is a good thing. No one ever got rich going bust.
3. Receivables: Consistently net receivables/ gross sale and should lower than competitors.
4. Many companies with durable competitive advantage have current ratios less than 1 because of their great earning power.
5. PP&E: not having them can be a good thing. E.g., Wrigley
6. Goodwill: If the goodwill account stays the same year after year and the company made some acquisitions, the company is paying under book value for a business. Business that benefit from some kind of durable competitive advantage almost never sell for below their book value.
7. Intangible assets: measuring the unmeasurable. E.g., Coca Cola, McDonald’s, Wal-Mart, Pepsi.
8. Long-term investments: tell about the investment mindset of top management.
Warren bought a controlling interest, stopped paying dividend and went and bought an insurance company. Then he took the assets of the insurance company and went on shopping spree for companies with a durable competitive advantage.
9. ROA: consider cost of entry into business, sometimes more can actually mean less over the long-term. Coca Cola (12%) vs Moody’s (43%)
10. Short-term debt: the smartest and safest way to make money in banking is to borrow it long-term and lend it long-term. E.g., Stable conservative bank Wells Fargo vs go-go aggressive bank BoA
11. Long-term debt: on any given year the company should have sufficient yearly net earnings to pay off all of its long-term debt within three-year earnings period.
12. D/E: below 0.8, the lower the better
13. Preferred stock: expensive money, companies like to stay away from it if they can.
14. Treasury stock: presence treasury stock and a history of buying back shares.
CF: “there is a huge difference between the business that grows and requires lots of capital to do so and the business that grows and doesn’t require capital” – W. Buffet
1. CAPEX: consistently using less than 25% of its net earnings (50% is also just ok)
2. Stock buybacks: tax-free way to increase shareholder wealth
So not invest in telephones industry
This entire review has been hidden because of spoilers.
July 11, 2023
Good intro to reading financial statements but not enough diversity of investment examples
I now see why AT&T is such a shit show
I now see why AT&T is such a shit show
Read
May 25, 2019Ugh...I am about halfway through this book and I don’t think I can finish it.
This would be a mediocre introduction to accounting and financial statements for an elementary schooler. But personally I wouldn’t inflict it on my own child—it’s written like a picture book for Mr. Burns.
This is a 175 page book that has 57 chapters, which means the average chapter length is just over three (often half-filled) pages. The book would be 100 pages if it didn’t have such a ridiculous number of chapters! It brings to mind the “5 page” papers I wrote in elementary school.
The message of this book can be boiled down to one sentence:
“All you have to do to get rich is to predict which companies will still exist and be making a profit in twenty years and invest in them!” Oh is that all? I never thought of it that way before. Apparently it is that easy though, since according to nearly every chapter in this book “...having _______ investments is (how/not how) we get rich.”
The phrase “durable competitive advantage” is used in almost every paragraph. If they had replaced this one phrase with an acronym the book would be ten fewer pages.
Every line item on the financial statements gets its own dedicated chapter, which would be fine if those chapters weren’t full of the same examples from the same five companies with the same mad-lib style prose.
The introduction to current liabilities was a half page, for christ’s sake! It took up two pages of the book, for three sentences! Half of that “chapter” consisted of the list of items in the current liabilities section and the phrase “durable competitive advantage over competitors.”
I wonder if the publisher feels like they got scammed when paying for this 175 page book, or if it is just me?
This would be a mediocre introduction to accounting and financial statements for an elementary schooler. But personally I wouldn’t inflict it on my own child—it’s written like a picture book for Mr. Burns.
This is a 175 page book that has 57 chapters, which means the average chapter length is just over three (often half-filled) pages. The book would be 100 pages if it didn’t have such a ridiculous number of chapters! It brings to mind the “5 page” papers I wrote in elementary school.
The message of this book can be boiled down to one sentence:
“All you have to do to get rich is to predict which companies will still exist and be making a profit in twenty years and invest in them!” Oh is that all? I never thought of it that way before. Apparently it is that easy though, since according to nearly every chapter in this book “...having _______ investments is (how/not how) we get rich.”
The phrase “durable competitive advantage” is used in almost every paragraph. If they had replaced this one phrase with an acronym the book would be ten fewer pages.
Every line item on the financial statements gets its own dedicated chapter, which would be fine if those chapters weren’t full of the same examples from the same five companies with the same mad-lib style prose.
The introduction to current liabilities was a half page, for christ’s sake! It took up two pages of the book, for three sentences! Half of that “chapter” consisted of the list of items in the current liabilities section and the phrase “durable competitive advantage over competitors.”
I wonder if the publisher feels like they got scammed when paying for this 175 page book, or if it is just me?
May 31, 2011
Ok, the title makes the book sound like a guaranteed bore. With all honesty, the book deals entirely with interpreting financial statements with the aim of finding companies with a sustainable competitive advantage. Most great companies in this category exhibit certain financial characteristics and the authors explain Warren Buffet's positive signals that he identifies as he examines such potential companies. However, be prepared. It is a walk through each account on the balance sheet....through the assets, liabilities and equity accounts. Mary Buffet and David Clark do this simply....you do not need an accounting background to understand. I don't believe there is anything more complex than 3rd grad math involved. I am a CPA so the accounting orientation did not bother me....in fact, it was appealing. In any case, it is a fast read and a good read if you want to explore the Warren Buffet method in more detail. I cringe at the title since it will automatically turn off so many potential readers, but I do recommend the book!
May 5, 2021
Um bom livro, e uma ótima introdução aos demonstrativos financeiros de empresas. Eu daria 3,5 estrelas, mas como acho 3 estrelas muito pouco (é um livro gostoso de se ler e muito interesante, apesar das pequenas falhas que vou comentar a seguir), vou dar 4 estrelas.
A visão do livro sobre os balanços é muito qualitativa, o que eu gostei, porém também senti falta de um aspecto mais matemático sobre as análises.
Além disso, senti falta de exemplos levando em consideração balanços financeiros de empresas reais em situações ambíguas - os exemplos do livro consistem ou em empresas muito boas (com vantagem competitiva durável), ou em empresas muito ruins. Não há exemplos em que as interpretações podem levar à conclusões dos dois lados, apesar de essas as situações existirem com consistência no mercado.
A visão do livro sobre os balanços é muito qualitativa, o que eu gostei, porém também senti falta de um aspecto mais matemático sobre as análises.
Além disso, senti falta de exemplos levando em consideração balanços financeiros de empresas reais em situações ambíguas - os exemplos do livro consistem ou em empresas muito boas (com vantagem competitiva durável), ou em empresas muito ruins. Não há exemplos em que as interpretações podem levar à conclusões dos dois lados, apesar de essas as situações existirem com consistência no mercado.
April 19, 2009
I got this book because I had realized in my MBA classes that I needed to get better at reading financial statements and figuring out the story behind the numbers. I can't say this book helped me with that. While it was interesting enough and is good for a beginner, if you have had any accounting classes it becomes a bit simplistic. The book was extremely repetitive - it definitely took the approach of trying to grill specific points into you - and simplistic to an almost offensive point. Did it give any insights into Warren Buffett's investment approach? Perhaps some basic ones - at least enough to get me interested in learning more about the man and his approach. But it did turn me off of wanting to read the other books by these authors (Buffettology and The Tao of Warren Buffett).
October 14, 2021
This book tends to assume that you're a complete dolt of a person. It does not trust you to make any conclusions for yourself. In my case that was a safe preposition. I know nothing about accounting and needed everything broken down for me. I thought it was weird that the book is written by Warren Buffet's ex-daugter-in-law, that she kept his last name after her divorce, and that she would mention her father-in-law on literally almost every page of a book she wrote but, I have to hand it to her, I really did learn more than a few useful tips.
This book is going to make me slightly less incompetent at reading financial statements. Now I'm at least smart enough to open up an excel sheet and crunch some ratios before I invest in a company. She made me just knowledgeable enough to know that I'm way too unqualified to pick my own stocks fulltime.
If I could read this book again, I would have done it with the financial statements for some of my favourite publicly traded companies to reference and work through alongside it. The concepts were helpful and with that aid, I would have done much better at memorising them all. In the absence of having done that, I'll probably pick up at least another book on the topic to make sure I really have memorised how to interpret every line of a financial statement.
This book is going to make me slightly less incompetent at reading financial statements. Now I'm at least smart enough to open up an excel sheet and crunch some ratios before I invest in a company. She made me just knowledgeable enough to know that I'm way too unqualified to pick my own stocks fulltime.
If I could read this book again, I would have done it with the financial statements for some of my favourite publicly traded companies to reference and work through alongside it. The concepts were helpful and with that aid, I would have done much better at memorising them all. In the absence of having done that, I'll probably pick up at least another book on the topic to make sure I really have memorised how to interpret every line of a financial statement.
February 16, 2021
This book characterizes what it calls a “business with durable competitive advantage” and goes on to explain how to value such a business — mainly drawing information from its financial statements. This book was quite enjoyable even (or perhaps more so) to me as a beginner trying to learn corporate finance and value investing. While I really liked the ideas detailed in the book, I would have liked to see some more rigor in its explanation. That said, I also feel the lack of rigor makes the book more accessible to a larger audience. I wish there was a more comprehensive book talking about these ideas in detail and perhaps more rigorously.
Overall, this book can bootstrap your value investment strategy.
Overall, this book can bootstrap your value investment strategy.
July 24, 2021
A manera de introducción, resulta útil el objetivo del libro: encontrar empresas que, dado sus números, resultan una oportunidad para incrementar nuestro patrimonio.
Yo, como novato, me llevo ideas interesantes en el mundo de las inversiones. Sin embargo, por momentos, resulta excesivo y molesto la incesante invitación de visualizarnos como millonarios y endiosar a Warren Buffet como un role model.
Yo, como novato, me llevo ideas interesantes en el mundo de las inversiones. Sin embargo, por momentos, resulta excesivo y molesto la incesante invitación de visualizarnos como millonarios y endiosar a Warren Buffet como un role model.
May 25, 2017
Highly recommend this book. I learner a whole lot about investing and researching which companies are the best to invest in, and I think I need to buy this book at some point so that I can review the topics discussed. Excellent book, this is a must read!
June 2, 2017
Quick and straight way to read financial statements in the quest of seeking "companies with durable competitive advantage" (yet the book can be even shorter). It is still a good book even though you seek more exciting thing ways to invest than Buffett style because financial statements is the basis of logical understanding of business.
Want to read
April 7, 2018i WANT TO READ IT NOW.
July 21, 2020
Livro básico para entender sobre balanços patrimoniais e demonstrações financeiras.
October 28, 2020
Great beginner-friendly introduction to understanding financial statements and key metrics to look for. I only wish the author included more company examples than the 5 recycled throughout the book.
January 25, 2023
Dilimize çeviren Ergün Unutmazın büyük başarısı. Keşke Türkiye özelinde daha detaylı bir kitabı kendi yazsa idi.
February 20, 2024
A must read for beginners on investing
February 25, 2024
Great recap of basic accounting. Enjoyed the refresher. Short book that was well laid out / easy to read.
October 4, 2020
Nếu nói đây là một cuốn sách hay cho nhà đầu tư thì không. Nhưng nếu cuốn sách này vào tài liệu tham khảo cho môn nguyên lý kế toán thì yes, absolutely yes. Vì đâu phải ai học nguyên lý kế toán với mong muốn trở thành kế toán hay kiểm toán viên? Đã đến lúc giảng viên đi tìm ứng dụng gần gũi hơn cho môn học của mình.
Link: https://www.pandoranoise.com/post/b%C...
Link: https://www.pandoranoise.com/post/b%C...
October 3, 2023
Pretty basic but a couple nice insights. I think the alpha has been priced in on this one.
January 20, 2019
Very helpful for people who are learning how to read financial documents.
January 11, 2022
While barebones, it delivered the goods.
March 12, 2017
Good for starters
Every financial statement heading has a precise meaning for Mr. Buffet. Overall analysis for beginner investors to make sense of the financial statements.
Every financial statement heading has a precise meaning for Mr. Buffet. Overall analysis for beginner investors to make sense of the financial statements.
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