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Warren Buffett is one of the richest men in the world. One of the key components to his multi-billionaire success has been his ability buy companies with a sustainable competitive advantage. Think Coca-Cola, Moody’s or See’s Candy. For this video, we are going to see if we can mimic his success on how to make money, by learning how to identify companies with such a sustainable competitive advantage. More specifically, we are going to learn how to do this by analysing a stock market company’s financial statements – the income statement, the balance sheet and the cash flow statement. This is a top 5 takeaways video of “Warren Buffett and the interpretation of financial statements”, written by Mary Buffett and David Clark.
Playlist on how to master stock market accounting:
Top 5 takeaways from Warren Buffett and the Interpretation of Financial Statements:
01:25 1. Consistency is King
03:32 2. What Warren Buffett is Looking for in an Income Statement
05:40 3. What Warren Buffett is Looking for in a Balance Sheet
08:00 4. What Warren Buffett is Looking for in a Cashflow Statement
09:50 5. When to Sell
TL;DW:
– When you are looking for a business with a durable competitive advantage, the keyword is consistency
– In the income statement, look for consistently growing net earnings and profit margins that consistently beat the competitors
– When observing the balance sheet, remember that the superior business has a high return on capital, that it seldom requires a lot of debt, and that retained earnings typically shows a steady growth
– In the cash flow statement, you want to make sure that the business is producing money for its shareholders, by examining its capital expenditures
– Even a fantastic business should be sold if you need money elsewhere, its competitive advantage is at stake, or if the price tag is at a crazy level
My goal with this channel is to help you make more money and improve your personal finances. How to become a millionaire? There are many ways to get there – investing in the stock market, becoming a stock trader, doing real estate investing, or why not becoming an entrepreneur? But whether you are interested in how to invest in stocks or investing strategies for creating passive income with rental properties – I hope to be able to provide you with a solution (or at least an idea) here. Warren Buffett – the greatest investor of our time – says that you should fill your mind with competing ideas and then see what makes sense to you. This channel is about filling your mind with those ideas. And in the process – upgrading your money-making toolbox. .
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WARREN BUFFETT AND THE INTERPRETATION OF FINANCIAL STATEMENTS
financial analysis of a company
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Playlist on how to master stock market accounting: http://bit.ly/2ScRdfk
Are these things in the video that Buffette looks for in a company applicable only for an investor with big amounts of money, or is it also applicable for investors with smaller amounts of money?
amazing
thank you
A guest on The Wall Street Journal Report spoke sometime last week about making over $631,000 in 4months with a capital of $100,000, which made me realize that as a beginner i have alot to learn, so please assist me with any pointers or tips that would help me make this much profit.
Can someone explain to me how you can read Playboy?
When analyzing Apples BS, could we say that the increase of liabilities, which increases the leverage ratio, along with the repurchase of stocks may lead to an unreliable ROE?
Coca Cola has got to be the single worst product on the planet ever created.
Overall
Consistency RnD , debt , consistent growing earning, 10 year period, profitability, cost
Income statement
Net income consistent
Gross profit / revenue = profit margin
Compare with competitor
High gross margin = more sale = greater profitability
Net margin = net income / revenue , >20% = very strong, smooth business
Balance sheet
Retained earning = add / withdraw from company reinvesting its net income or not , steady growth = good reinvesting
Increase dividend = less reinvest , vice versa
Return on equity = measure efficiency company use reinvested earning
Net income / total equity = return of equity
Little to no long term debt
Cash flow statement
Capital expenditure = spent on properties, plant, equipment
Capital expenditure/ net income = lesser better
<25% very good <50% acceptable
Augmented pay out ratio = share buyback / dividend = more % = better
When to sell
-Need more money for better investment
-Company may lose its competitive advantage
(local newspaper lose to online media)
-During crazy bull market
(fantastic business can be bad investment when you can acquire at crazy price)
-PE ratio >40 should start considering selling even if you believe in economic of company
hey! Can you use half year reports to do fundamental analysis? Or should you use annual reports from the year before then?
1:14 “Other guys read Playboy, I read financial statements” of Playboy.
I want it.
I want it ! Cash flow statement!
hey guys where can i find this raw financial reports?
What is a good website to look for these statements? Thank you
You know it is good content when you want to watch it over and over to get the finer details – – great job!
I WANT IT!
It's so fantastic video
Gross Margin > 40%
Net Margin > 20%
High Return On Equity , High Return On Net Tangible Assets
Little To No Long Term Debt
Less Than 4 Years To Pay Off Long Term Debt With Earnings
Cap Expenditure/Net Income < 25% , <50% is acceptable
Silly question, but if Buffet (or someone emulating him) wants to hold his stocks forever, how does he get money to pay for things?
i want it
Yes ,I want a video on cash flow.
i want it
Video seems to oversimplify a lot of things into ratios. I would prefer directly reading from good investors like buffett or graham for a more in depth look. It all depends on price and value, and high margin does not neccesarily indicate a strong brand – just most of the time. Investing is not all about looking at ratios, but interpreting these statements with qualitative thinking about the future of the business as well. Essentially future ROIC and future cash flows to the investor are the most important thing