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Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage Hardcover – Deckle Edge, October 14, 2008

ISBN-13: 978-1416573180 ISBN-10: 1416573186 Edition: 1st

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Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage + The New Buffettology: The Proven Techniques for Investing Successfully in Changing Markets That Have Made Warren Buffett the World's Most Famous Investor + The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) (Collins Business Essentials)
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This Book Is Bound with "Deckle Edge" Paper
You may have noticed that some of our books are identified as "deckle edge" in the title. Deckle edge books are bound with pages that are made to resemble handmade paper by applying a frayed texture to the edges. Deckle edge is an ornamental feature designed to set certain titles apart from books with machine-cut pages. See a larger image.

Product Details

  • Hardcover: 224 pages
  • Publisher: Scribner; 1 edition (October 14, 2008)
  • Language: English
  • ISBN-10: 1416573186
  • ISBN-13: 978-1416573180
  • Product Dimensions: 5.6 x 0.8 x 7.5 inches
  • Shipping Weight: 12.8 ounces (View shipping rates and policies)
  • Average Customer Review: 3.6 out of 5 stars  See all reviews (82 customer reviews)
  • Amazon Best Sellers Rank: #57,893 in Books (See Top 100 in Books)

Editorial Reviews

Review

"Just as top musicians memorize scales, and the best golfers perfect swings at the driving range, investors who want sustainable, good returns must master the critical basics that Mary Buffett and David Clark lay out for us in this clear explanation of Warren Buffett's methods. I don't think there has been a better time for investors to relearn the fundamentals. Follow these methods and you will see results!" - Timothy P. Vick, senior portfolio manager, The Sanibel Captiva Trust Company, and author of How to Pick Stocks Like Warren Buffett

About the Author

Mary Buffett is a bestselling author, international speaker, entrepreneur, political and environmental activist. Ms. Buffett appears regularly on television as one of the top finance experts in America.  She has been the principal speaker for prestigious organization around the world.  Ms. Buffett has worked successfully in a wide range of businesses including extensive work as a consultant to several Fortune 500 companies.  She lives in California.

David Clark holds degrees in both finance and law, and in the late seventies was the founding member of the original Buffettologists - a small group of early Berkshire shareholders who studied the investment methods of Warren Buffett. He is now recognized as one of the world's leading authorities on the subject and has written extensively on it. He lives in Warren Buffett's hometown, Omaha, Nebraska, and is the Managing Director of a private investment partnership.

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Customer Reviews

The balance sheet does not balance!
Red
If you can get by that (and to do that I reminded myself that even people with ADD will be buying this book), then it's well worth the read.
B. A. McDonald
Think if you were Warren Buffett and looking for a company to invest.
Panit Tuangsuwan

Most Helpful Customer Reviews

113 of 117 people found the following review helpful By D. H. Clark on October 15, 2008
Format: Hardcover Verified Purchase
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.
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107 of 114 people found the following review helpful By Thomas Henry on October 17, 2008
Format: Hardcover Verified Purchase
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.
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35 of 39 people found the following review helpful By Betty Kincaid on January 21, 2009
Format: Hardcover
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.
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49 of 57 people found the following review helpful By Loyd E. Eskildson HALL OF FAME on October 14, 2008
Format: Hardcover
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.
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