Books on analysing annual reports

[Twinklefingers]

Hi,

Can anyone recommend any books on analysing reports/balance sheets etc? My accounting skills are only high school level and several decades out of date and the more I look at these reports the more I realise I need to learn.

[ENP]

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

Really good book.

Other than that, get a year 12 or 13 accounting school text book.

[Twinklefingers]

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

Really good book.


Awesome that's exactly the sort of thing I'm after thanks a lot.

[Twinklefingers]

Just google stuff - there's heaps of info on analysing financial reports. I'm lazy and usually rely on the financial web sites to do it for me - so check out what you want to know and see if Google Finance, Tradingroom.com.au or your broker has already done the hard yards.

That's fine in a bull market where you really can't lose but I think to do well through the cycles you need a deeper understanding rather than relying just on what someone else is telling you. I use ASB and Morningstars information is imo at best sparse and at worst rubbish.

For example I was trying to research TWR before they released their latest results. I knew they were hacking the company up and at a certain share price there would have to be profits to be made. My lack of ability left me deciding not to buy. Their shares went up nearly 10% yesterday after the announcement (and I still don't know why :)

[CJ]

I use ASB and Morningstars information is imo at best sparse and at worst rubbish.That is the general consensus - so maybe you aren't as bad at analysis as you think :D.

[Twinklefingers]

Yes ASB is crap, but Comsec calculates everything I need. I find it far more valuable to see financial trends over time (eg. 3-5 years increasing EPS, DPS, ROC, ROE, margins, cash flow, debt reduction etc) than dissecting a single balance sheet. You would need to analyse at least 3 years of annual reports per company to gain any meaning from them. My only issue with Comsec is that there is no half year update, so I normally check with Google or Tradingroom for updates on the basic metrics.

The value in financial analysis is being alert to changes over time, it was the obviously declining ratios that saw me exit ABC Learning well before it spontaneously combusted.

Lastly, share prices do not change based on what is released in the annual report, it changes based on what the company's forecast for the future is. That is why companies who beat market expectations still suffer price falls, and companies who do worse than expected see price gains.

Thanks for the headsup on Comsec and Google finance. I'd been using Yahoo finance which doesn't seem nearly as good as Google. Those sites definitely help but I still think you underestimate the value of flicking through a few annual reports yourself in addition to the information on those websites but if it works for you, what do I know, I'm pretty new at this but I don't believe there is such a thing as too much information.

I've ordered a copy of Interpretation of Financial Statements and if anyone is interested, Benjamin Grahams Security Analysis is supposed to be worth a look too.