Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

 
List Price: $24.95

Our Price: $14.21

You Save: $10.74 (43%)

 


Product Description

With an insider's view of the mind of the master, Mary Buffett and David Clark have written a simple guide for reading financial statements from Warren Buffett's succccessful 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 discover:

? 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.

Customer Reviews:

  • Financial Intelligence
    This book teaches a reader who has no economic degree, in a very friendly manner, about the three main parts of a financial statement: balance sheet, income statement and statement of cash flows. The lessons are provided in a very detailed way, with tables and step-by-step explanations. This is in contrast to "The Little Book of Value Investing" by Christopher H. Browne and Roger Lowenstein, which also gives a framework to analyze financial statements for successful stock-picking, but does not teach the basics of understanding each and every line in the statements.

    This book is very different from the student's manual of corporate finance. It is very practical. It has a separate chapter for every main item of a statement, and explains with examples and advises how it affects prospects of the company and whether the stock of the company should be bought to get the extraordinary long-term results.

    This book also describes the differences between Benjamin Grahams way of picking stock and one derived by Warren Buffett.

    Many amateur investors are losing money because they have no basic education at least to understand a financial statement. They pick fashionable, hot stocks, or just stocks of a company which product they like. For example, they are passionate listeners to satellite radio and just because of that they buy "SIRI" regardless of the negative equity and negative operating income. Refinancing the huge debt in the credit crunch of 2008 is a challenge. This book will help the new investors to understand these issues and to make smarter stock picking. Of course, this book is not a panacea. Of course, there is always risk. The financial intelligence improves the odds. Thus, what is risky for one person is less risky to someone else. That is the primary reason to invest more in one's financial education than in the stock. The smarter you are the better chance you have of beating the odds. It is not gambling if you know what you are doing. It is gambling if you are just throwing money into a deal and praying. The idea in anything is to use your technical knowledge, wisdom and love of the game to cut the odds down, to lower the risk. So let this book will be brick in the foundation of financial education.

    In addition to this book, I can recommend the other (previous) books by Marry Buffett. They are very useful for the right stock-picking. I also recommend "Value Investing With the Masters" by Kirk Kazanjian and "The Only Three Questions That Count" by Kenneth L. Fisher.

    If you want to read something good about Warren Buffet's life and his investment strategy, I can recommend "Buffett: The Making of an American Capitalist" by Roger Lowenstein and "The Snowball" by Alice Schroeder....more info
  • A Buffet Primer
    This is a well written study of financial statements, the Buffett way. The study is quite simplified but this is the beauty of the book. If you have little understanding of financial theorys you will find this the best books you could ever read. For those with a greater understanding of finance you will receive an added value in the detailed study of the way Mr. Buffett analysis's each and every step of a financial statement and what he feels is important and what is not. This is a book that I will keep in my financial group of readings and I am sure I will read excerpts over and over. Buy this book, it is a investment in your future. ...more info
  • A Good Tool For Investors
    This volume focuses on the main financial statements in relation to investing.

    Written by Mary Buffett and David Clark, this book goes through the income statement and balance sheet line by line. Each part is discussed in terms of what Warren Buffett (arguably the greatest investor in history) likes and those areas upon which he focuses.

    Ms. Buffett apparently listened and learned a lot along the way. She is using her surname to the fullest in authoring this book. In spite of that, she seems to know her stuff.

    I am certainly no super investor. I learned a lot reading this. It is very interesting to see the things that the authors indicate Warren Buffett finds important. I recommend it for anyone who invests at all. Even those who do it professionally can certainly learn some things from Buffett - even if it is indirectly....more info
  • Primer on Buffett and Reading Financial Reports
    Five stars for this book because it accomplishes what it intends to be, a simple primer on how Warren Buffett invests, which means reading financial reports for critical details that tell you the financial health of the company and from that understanding, where it is going in the future. The book features over 60 short chapters starting with Buffett's philosophy on investing for the long haul and then, in a very simple format, breaks down financial statements; income statements, balance sheets and cash flow statements . The authors also explain key ratios that relate to performance such as gross profit to gross profit margin. The book also includes plenty of examples and a glossary all in less than 200 pages. Not for the accountant or someone well versed in stocks, but that's not the intended audience. For those interested in a reasonable introduction to smart investing, you can read the whole book on a three to four hour plane ride and you will see why companies like the auto industry struggle to make a profit. Of course Buffett's key, investing in companies with an incredible competitive advantage with low cost needs for retooling ...more info
  • Basic and redundant...not for business people
    This book may be helpful for those seeking a general understanding of financial statements and what Mr. Buffett considers in his review, but be aware of several points:

    1. The book is written in remedial business language that leaves out a lot of important details that an active investor should know. It is clearly not intended for anyone with a decent understanding of accounting or finance;

    2. The book contains errors - in two separate tabular displays, the balance sheet presented is not even balanced;

    3. I wish I had a count of the number of times they wrote "durable competitive advantage." I get it - a durable advantage is important; and

    4. Entire paragraphs are repeated verbatim in some sections. The book is horribly redundant - the authors clearly ran out of things to say.

    In my opinion, the authors rushed to release this book and profit from the market downturn. Anything with Warren Buffett's name on it is apparently a hot selling item currently, and while this book certainly has some useful bits of investing advice, I would be surprised if Mr. Buffett himself actually read or approved the content of the book. The vast majority of the book is very general, basic information, and the only reason the book is getting attention is because the authors are lucky enough to have worked with Warren Buffett and are able to use his name in their title.

    Overall, if you know nothing about investing or financial statements, this is probably a good book for you; however, if you have a business background and are somewhat versed in accounting and finance, you will find this to basic and redundant. It is a quick read and a cheap price, so I am not entirely negative on it, but certainly wish I would have flipped through a hard copy before ordering on Amazon. Lesson learned. I would give it two stars, but knocked to one for the errors and redundancy....more info
  • Buffett, the Empire Mystique Slayer
    Warren Buffett and the Interpretation of Financial Statements looks like a book of secrets, but the bulk of its 57 chapters comes off more like a glossary terms of 8Qs, 10Ks, and earnings reports. There don't seem to be any revelations, just a litany of number crunching. The first few and last few chapters have the level of interest that you anticipate reading how Warren Buffett made billions picking durable earning companies. Here are the methods spelled out in detail. It's much like when Sherlock Holmes itemizes the observations that shape his deductive conclusions and Watson exclaims, "It's the essence of simplicity!" Holmes then laments that by giving away the secret behind his methods, it takes away the mystique.

    So it is with Buffett's methodology. By spelling out the line items in mind-numbing detail, the authors reduce the Buffett mystique to a spread sheet of numbers and ratios. The chapters skim each line item in 1 to 4 pages that seems like a repetition of what spells out the durable, competitive advantage that Warren picks in a company.

    The layout of the cover leads you think it's a little book by Buffett that gives his tips and advice for the price of a book--a deal, by anyone's reckoning. But it is authored by Mary Buffett, a daughter in law of the legendary investor, and investment author David Clark. The constant name-dropping becomes an annoyance when every reference leads to the same conclusion that the line item in question is or isn't the tally that Warren looks for in a company. While the observations seem to be legitimate indicators of a company's investment value, don't expect to be entertained by charming anecdotes of an insider's view of the business. It isn't that kind of book. Besides the obvious intended investor reader, I thought of a couple of audiences for whom this advice might be valuable: Company leaders could look at their own business to refine the soundness of their own accounting practices, making sure they don't fall for the pitfalls of long and short-term debt, over-capitalization, or constant reinvention in a competitive niche. Individuals too can benefit from treating their personal budget, family, or sole-proprietorship as a Buffett-pick business that needs to pay attention to the details that make for a sound financial statement.
    ...more info
  • The Best Book on Warren Buffett
    I am a great fan of Warren Buffett even though he refused to answer my recent letter of the ground that it will take him 30 minutes to dictate the answer. Anyway, I have read all books on Warren Buffett, including untold number of articles about or by Warren Buffett. In my judgement, this is the best book yet written on Warren Buffett. It clearly describes Warren Buffett's methods and the fundamentals he uses. It certainly has captured the essence of the Omaha native. It is a groundbreaking, must-have book for all serious investors....more info
  • Verbose, cloying cute, and just plain wrong
    Mary Buffett's fortuitous choice of a surname and gravy-training of her ex-father-in-law are her only qualifications for writing this dreadful excuse for a book.

    The book is loaded with inaccuracies, the primary being this: she attempts to educate the reader by referring throughout the book to a fictional balance sheet, listing current assets, depreciation et al.

    Here's the thing: her balance sheet DOESN'T BALANCE! The assets don't equal the liabilities plus the shareholder's equity. Anyone with even a rudimentary knowledge of accounting knows that that can't be.

    Another gem is when she says that smart investors invest in companies with a natural near-monopoly, that essentially have a market to themselves. She then lists some companies that allegedly fit that criterion. The first two companies she lists are...wait for it...

    Coke and Pepsi.
    The classic textbook example of two rival companies that produce an almost identical product, and Mary Buffett lists each as her example of a company that has a market to itself.

    The writing style is annoyingly redundant, patronizing and just flat-out wrong. It's amazing that it took two "writers" to put together such a rotten book. You're better off buying nothing. ...more info
  • Great for the beginning to intermediate investor!
    If you have an underlined copy of Security Analysis (Ben Graham's 700 page treatise on value investing) sitting on your desk or you are a professional money manager you may or may not find this book interesting. But if you are a beginner to intermediate investor who is interested in getting a quick basic course in how to read financial statements from a Warren Buffett perspective it is the perfect book.

    I'm a professional with $500 million under management and I got a couple of good ideas out of it. But at this stage of my career getting a couple of good ideas on how to make more money is just fine with me. It only takes a couple of great ideas to get rich and even fewer to stay rich. Their book the New Buffettology, which was published in 2002, is aimed more at the professional investor and many people in the investment business use it. But I would say this book is for that beginning to intermediate group that really are a little in the dark about what to look for in a company's financial statements. And it focuses on what to look for if you are like Buffett and looking for a company with a Durable Competitive Advantage. Also it is a quick and easy read - unlike Graham's Security Analysis which most people buy but never read - try reading 700 pages on how to read a financial statement and see how far you get before you nod off with boredom. Quick and easy can be a good thing for great many investors.

    Am I glad I bought it? Yes. Would I recommend it to my friends that aren't professionals? Yes. Would I recommend it to professionals? Yes, but don't expect to get more than a few good ideas out of it....more info
  • Beginner's Read
    Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

    If you are an educated investment professional you will find this a mediocre read at best, but will also be content with getting a couple of good ideas from the read. The title is a little deceiving because when you read "Interpretation of Financial Statements" on the cover you probably referencing the one by Benjamin Graham in your mind (which is way better!)

    This is a great read for a beginner with little exposure to stronger works on Buffett or fundamental analysis. Even then, I believe Mary's Buffetology provided a more thorough outlook on Buffett's investment principles. Again, if you don't have any exposure to financial statements, then this text is helpful.

    Low expectations are key with this book. Don't expect it to be thorough, don't expect to see a clear link between financial statement analysis and durable competitive advantage, and certainly do not expect to see Warren Buffett's definitive approach to financial statement analysis. It is not as thorough, as inclusive, or as accurate as the title might lead you to believe. The book is cheap however, and is worth the 30 minutes you will spend reading it. Beyond that I think both, beginner and a professional investor, are better off reading primary sources on this subject.
    ...more info
  • Excellent Educational Resource
    The book contains a very detailed approach to financial statement analysis for making investment decisions. However, it explains the detail in a practical/common sense manner, which makes it easy to read and easy to comprehend even for someone who is not familiar with financial statements. For someone who is familiar with financial statements, but doesn't know how to use them to make investment decisions, this is what they need to read. It will permanently change the way they review financial statements and the value they place on them....more info
  • Simplicity and superficiality
    The authors present some simple accounting concepts in light of the "Old" Buffett's investment approach. Despite several obvious errors (like numbers in the balance sheets didn't balance out), it gives some brief idea about how you should think like the "Old" Buffett--that is, if you are already a big money investor.

    Most of the Buffett books out there mislead their "poor" readers by focusing on the "Old" Buffett's investment approach while the real problem is how to invest like the young Buffett. What they really need is the know-how of the "first jump", not big capital management with durable competitve advantage in mind. Ironically, after you have a few millions, the "Old" Buffett's investment approach doesn't really matter to you any more. Don't forget making money by investing is Buffett's hobby, other rich guys' hobby may be spending and having professionals manage their money rather than handling by themselves(or simply buy shares in Berkshire Hathaway, or in index funds).

    In short, this is just another book that gets you into the internal logic of value investing when in fact the external logic of it is more relevant. But even for the internal logic of value investing, there is still a problem of "back testing", that is, the authors use Buffett's current portfolio we all know (those good ones, not "follies" like Salomon Brothers, U.S. Air, or Berkshire Hathaway itself), and employ "after the fact deduction" to summarize the "perfectly ideal, universally applicable, and objectively observable" Buffett Approach, without supporting it with real situational facts from Buffett (as if they know everything about Buffett's analysis and decisions). For those who are familiar with the Buffett type of accounting, you are not going to see any in-depth analysis regarding "accounting earnings vs. economic earnings", "accounting goodwill vs. economic goodwill", "accounting book value vs. intrinsic value", and "look-through earnings" or "owner earnings"....more info
  • Somewhat Useful
    Mary Buffett trades on her former daughter-in-law status vs. Warren Buffett to write books about his methods and insights. Readers have to take her word for the accuracy and inclusiveness of her material - having read "Snowball" and other sources I suspect Mary's assertions are not as accurate or inclusive as one would wish, but they're better than nothing.

    The book's primary assertion is that Buffett looks for a sustainable competitive via financial statement data; he is especially focused on finding those with a low-cost advantage.

    Buffett purportedly begins by looking at a firms income statement, seeking high gross margins. Good examples include coca-Cola @ 60%, Moody's @ 73%, Burlington Northern @ 61%, and Wrigley's @ 51%; G.M. (21%), Goodyear (20%), and United Airlines (14%) provide unattractive examples. Sustained high gross margins (eg. ten years), not just one year, are required.

    Buffett then moves to Selling, General and Administrative Expenses. Coke spends an average of 59% gross profit in this area, G.M. 28-83%, Ford 89-789%. As for R&D, Coke and Moody's have none, Depreciation - Coca-Cola 6% of gross, Wrigley's 7%, P&G 8%, vs. G.M. 22-57%. Interest Expense at P&G runs about 8% of operating income, 7% at Wrigley, vs. 49% at Goodyear. Wells Fargo pays out 30%, relatively high, but also the lowest of the top five banks (industry average = 70%).

    Buffett is not interested in extraordinary income - eg. asset sales. Net Earnings/total revenues should be on an upward trend over the past ten years - Coke = 21%, Moody's 41%, SouthWest Airlines 7%, and G.M. 3%

    Buffett prefers stock buybacks to dividend payouts due to the better tax treatment.

    Finally, Buffett does not follow the crowd - buy in a bear market, sell in a bull (P/E/ ratio > 50).

    The book goes on to examine cash flow and balance sheet issues, but there the treatment is less precise and useful....more info
  • Marginally helpful if you have no experience with financial statements
    Having read the favorable reviews on Amazon, I was really looking forward to reading this book. Suffice it to say, I'm having buyer's remorse.

    Buffett basically walks through the basic financial statements, caption by caption, and explains what each account represents. If you have no experience whatsoever with financial statements, this book may be helpful. However, I found it analytically shallow and it basically consists of a description of the account and a high level blanket statement on "what Warren likes." Unfortunately, the "what Warren likes" sections are quite unsubstantive ("Warren loves companies that make a lot of money!") and I think this book fails to make the link between financial statement analysis and durable competitive advantage. From a financial statement analysis standpoint, there is absolutely nothing in this book that you couldn't get for free off of Wikipedia and from an investing methodology standpoint you're much better off going to the primary sources (ie Graham and Dodd, Phil Fischer, BRK shareholder letters).

    I can't really think of a time when I've been more disappointed in a book and I definitely feel like I wasted my money....more info
  • SIMPLE Corporate Financial Health Check List
    This book is valuable! Think if you were Warren Buffett and looking for a company to invest. How does Buffett choose a company? How about yourself? This book tell you how. By studying this book, you should be able to identify a good company and a crap one. This is how Buffett invests.

    Look! On the other side of reading this book, instead of looking at outside, it can teach how to look inside your own. What about your own company? As an entrepreneur, I also use the book as a financial health check list to improve my company. Some said information in this book is too simple and too common. (Everyone should know.) You are right! But you know what! Simple is understandable and usable. Complicated is only interesting. I believe Warren Buffett is a simple guy and that is why he's RICH. Hello Complicated! How much you got? Talking is cheap. (Doing is different!)

    Thanks for reading. Get a book. It's worthy and valuable. Trust me!...more info
  • Read financial statements like Buffett
    The authors of this book did an outstanding job describing how Warren Buffett reads a company's financial statement to find a long term durable advantage. The book is brief and to the point with short chapters examining the income statement, balance sheet, and cash-flow. I was concerned that this book might by dry and tedious reading like some of Benjamin Graham's books, but I was pleasantly pleased that the authors could make this book both informative and enjoyable to read. The key to Buffett's philosophy is to find companies that have a huge durable advantage like Coca Cola, Wrigley's, Hershey's, The Washington Post, or Moody's. Even though Coke's brand name is worth billions it does not show up on the balance sheet. How much would it cost to start a newspaper and compete with the Washington Post? Mr. Buffett gets into these companies when the price is very good in bear markets. With the companies profits growing at 10-15% a year he simply holds the stocks and lets the stock price catch up to the value of earnings value. When a stock compounds in value at 15% a year and you do not sell it and pay capitol gains tax, you end up making a fortune. I have studied Warren Buffett and had great fortune returning 20% a year following his methods, and also stepping out of the market when the valuations got to high to keep my gains. If you want to invest like the master himself, this is the best book to start with or for a refresher it is a must have....more info
  • Uncertain
    I have noticed that several of Warren's recent stock purchases go against almost everything explained in this book. ...more info
  • A concise, easy to read guide on the financial statements
    For the beginner, who wants to unterstand company financial statements, this is a good book to have. This book gives a step by step commentary into the relevant components of a typical company's financial statement. ...more info
  • A Basic Primer with Conservative Advice
    This is a quick and easy-to-read book that details some of the arcana of what appears on a company's financial statements. Those with experience in the field of investing probably know everything here, but they might still pick up something useful from the emphasis that is placed on certain numbers/ratios, things that supposedly Mr. Buffett uses to help find his next company to buy.

    The advice provided by this emphasis should be very good to someone who is not interested in gambling, but rather is looking for good companies that will provide a better than average return over a long term (10+ years) investment. Following this advice will clearly lead you to some rather staid, unexciting companies (Coca-Cola, Wrigley's), and will definitely steer you away from young, technically oriented companies. This is not necessarily a bad thing, but the usefulness of this approach depends on both what your investing goals are and how much capital you can invest for what period of time. However, being able to interpret just what those numbers mean on a financial statement is a good skill to have, regardless of your investing goals.

    Unfortunately, the book is marred by multiple repetitions of certain very basic points, and some statements that are false to fact ("No one gets rich investing in companies that are losing money" - quite a few do quite well selling such a company short or buying put options). And although some advice is given on market timing - just when should you buy a company after you've identified it as a good long-term prospect - I found the advice inadequate, with not enough emphasis or detail on looking at economic conditions as a whole, market sentiment, current interest rates as a competitive investment vehicle vs your 'pick', etc. Also left hanging was how to identify an otherwise good company that has made a 'solvable' error and is not currently doing well - figuring out what a solvable error is is a matter of judgment and often requires expertise not just in the world of finance but in the specific product line that company is involved with.

    Recommended for people who are relatively new to investing, especially young people who can seriously benefit from having a long-term view of investing, but it will provide little for more experienced investors.

    ---Reviewed by Patrick Shepherd (hyperpat)
    ...more info
  • Primer on Buffett and Reading Financial Reports
    Five stars for this book because it accomplishes what it intends to be, a simple primer on how Warren Buffett invests, which means reading financial reports for critical details that tell you the financial health of the company and from that understanding, where it is going in the future. The book features over 60 short chapters starting with Buffett's philosophy on investing for the long haul and then, in a very simple format, breaks down financial statements; income statements, balance sheets and cash flow statements . The authors also explain key ratios that relate to performance such as gross profit to gross profit margin. The book also includes plenty of examples and a glossary all in less than 200 pages. Not for the accountant or someone well versed in stocks, but that's not the intended audience. For those interested in a reasonable introduction to smart investing, you can read the whole book on a three to four hour plane ride and you will see why companies like the auto industry struggle to make a profit. Of course Buffett's key, investing in companies with an incredible competitive advantage with low cost needs for retooling ...more info
  • More help at a critical time....
    I had read Buffettology and heard this book was out. Buffettology was written with such clarity and I had high hopes for this book as well. I was not disappointed. This book delivered! In these times it is extremely helpful for me to be able to understand Buffett's financial strategies. ...more info
  • The Best Book on Warren Buffett
    I am a great fan of Warren Buffett even though he refused to answer my recent letter of the ground that it will take him 30 minutes to dictate the answer. Anyway, I have read all books on Warren Buffett, including untold number of articles about or by Warren Buffett. In my judgement, this is the best book yet written on Warren Buffett. It clearly describes Warren Buffett's methods and the fundamentals he uses. It certainly has captured the essence of the Omaha native. It is a groundbreaking, must-have book for all serious investors....more info

 

 
Old Release Old Products