Warren Buffet and the Interpretation of Financial Statements
By: Marry Buffet and David Clark
The way this book was written reminds me more of a textbook than an actual book, which is great for the purpose of this book. The authors do a great job of diving into each line of each financial statements and outlining exactly what to look for. Since reading this book, I have developed a much better understanding of how to judge a company based on it's financial statements. This book, as it's titled, covers the 'Warren Buffet' style of investing which focuses on looking for stable undervalued companies. In particular, these companies would ideally have lots of free cash flow, steady revenue growth and relatively stable profit margins and expenses. Most importantly, while looking for all the previous characteristics, you also want to make sure the company you are investing in has a durable competitive advantage. This is something which differentiates the company from its competitors, a couple examples of this are patented technologies or being a monopoly in an industry with high barriers to entry.
I made several pages of notes while reading this book, I refer back to these notes very often and apply the skills I learned every time I purchase shares of a company. Although some may argue that Warren Buffet's style of investing is a tad bit old fashioned, I still found many benefits to understanding the basics of valuing a company.
Is this Book for You?
I would recommend this book to anyone who wants to learn the basics of valuing a company by critically analyzing and breaking down their financial statements. This book covers Income Statements, Cash Flow Statements and their Balance Sheet.
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