For those who don’t know who Warren Buffett is, if there are such people left in the world, the book’s first writer Mary Buffett introduces him as, “For twelve years, I was the daughter-in-law of Warren Buffett, the world’s most successful investor and now its greatest philanthropist.” The purpose of the book is to explain and explore the two revelations of Warren Buffett, which are: how to identify an exceptional company with lasting advantage and how to value a company with such advantage.
Accordingly, Warren Buffett believes such a company is unique for it sells a unique product, or a unique service or it is a buyer and seller of a good product that people always need. For this, he consults the financial statements of companies that survived successfully for many decades through, mostly, common online search engines.
The teaching part of the book comes after chapter six with a close look at the Income Statement in chapters seven through twenty, followed by the Balance Sheet through chapters twenty-one to forty-nine, The Cash Flow Statement through chapters fifty to fifty-two, and the last part, Valuing the Company with a Durable Competitive Advantage. It is in this last part that one finds the hints of a true strategy for stock selection. The book ends with an appendix and a glossary for select terms.
This book can be very useful for those who are just learning how to analyze stocks. Chapters are short and the details on the companies are few, to not confuse a novice. Still, a few interesting examples show how to differentiate a good business from a mediocre one, and the quotes, charts, and anecdotes instruct the new investor about the kinds of companies to stay away from, how to determine a long-term investment, and what can maim or kill a good business.
Warren Buffett and the Interpretation of Financial Statements : The Search for the Company with a Durable Competitive Advantage is written in a direct and very understandable language, and its dimensions make it easy to carry, although it is in hardcover with 224 pages. Published by Scribner in October 2008, the book is with ISBN-10: 1416573186 and ISBN-13: 978-1416573180.
The authors of the book Mary Buffett and David Clark have written other books on Buffett’s investment strategies such as The Tao of Warren Buffett, Buffettology, The New Buffettology, and The Buffettology Workbook.
Reading, understanding, and interpreting financial statements and investment fundamentals are a must for most beginner-to-intermediate investors, especially at this time when markets are insecure and unstable. Many investors buy stocks without taking a good look at a company’s financial statements to pay dearly for that omission later on. Whether one agrees with Buffett’s strategies or not and whether that same person approves the way this text is written or not, this book is a lucid and practical introduction to making wise investment decisions.