Library / Investment Tools
Date of review: July 2019
Book author: Marry Buffett and David Clark
Вook published: 2008
Book author: Marry Buffett and David Clark
Вook published: 2008
Warren Buffett and the Interpretation of Financial Statements. The Search for the Company with a Durable Competitive Advantage by Marry Buffett and David Clark (2008)
Another book out of about 10 was written by Mary Buffett (former daughter-in-law of Warren Buffett) on the investment approach of the legendary investor.
As with other books of this author, I highly recommend them to those who just learn about investing or Warren Buffett. It is written in very clear and simple language, which is the biggest advantage of the book.
The key point in the book is that you can use financial statements to understand better if the company has a competitive advantage or not. The author uses plenty of practical examples, which is quite useful as well.
Gross margin is the key indicator of whether the company has a competitive advantage, according to the author. If it is higher than the industry average, it means the business has either cost advantages (produces things cheaper) or quality/brand advantage being able to charge more for its products.
The author also provides key ranges for the main margins and ratio that could indicate a real competitive advantage, although it may be a bit of oversimplification given how unique these ratios are for each sector.
Importantly, Mary Buffett also points out that per-share earnings and other indicators as total growth may be funded from pure equity raise that would make the company look like a fast grower, but in reality, there would be little economic profit generated for shareholders.
The key point in the book is that you can use financial statements to understand better if the company has a competitive advantage or not. The author uses plenty of practical examples, which is quite useful as well.
Gross margin is the key indicator of whether the company has a competitive advantage, according to the author. If it is higher than the industry average, it means the business has either cost advantages (produces things cheaper) or quality/brand advantage being able to charge more for its products.
The author also provides key ranges for the main margins and ratio that could indicate a real competitive advantage, although it may be a bit of oversimplification given how unique these ratios are for each sector.
Importantly, Mary Buffett also points out that per-share earnings and other indicators as total growth may be funded from pure equity raise that would make the company look like a fast grower, but in reality, there would be little economic profit generated for shareholders.