How to Identify a Company with a Durable Competitive Advantage

Warren Buffet and the Interpretation of Financial Statements - Mary Buffet & David Clark - Simon & Schuster UK Ltd

Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage – Mary Buffet and David Clark

I usually buy books after I have done some research on them. This little book caught my eye in the bookstore as I was looking for a book for a reference about financial statements. Without thinking, I just decided to buy it.

Even though it looked promising as such, I ended up being disappointed. Instead of being a reference quide to cryptical financial ratios like ROI or ROE, this book is focused on a very small niche:

”How to find out if a company has a durable competitive advantage using the data from the financial statements”

In its small niche the book is performing ok. It is pretty clear, easy to read and the advice seems to be grounded on a sound basis. The book is divided into the  following:

  • Income statement
  • Balance sheet
  • Cash Flow statement

The authors walk you through these line by line and analyze their importance for the durable competitive advantage. I have the feeling that I got pretty good idea what to look for when I am reading through the financial statements.

It is important to note that using the advice in this book will just help you to indentify if a company might have a durable competitive advantage. I would suggest to combine it with other methods of analysis to increase the chances of being right.

The only real complaint I have is that somehow I feel that this book could have worked even better A4 or A3 checklist. Maybe that would have been hard to sell with the 10 € price tag though.

Even though the book is titled ”Warren Buffet and the Interpretation of Financial Statements” his role is to be just an example. It is one way of doing these kind of books and not necessarily a bad one. I just have to say that the way the authors keep talking about ”Warren this and that” in third person is pretty damn annoying.

As a final statement I would say that the book is mainly for those people who are interested in Warren Buffet and/or his investment style and have already read some books about these. For other people looking for more generic advice about interpretation of financial statements or investing, I would suggest looking further.

The book “Warren Buffett and the Interpretation of Financial Statements” is available for example from Amazon.com and Amazon.co.uk.

If you buy the book trough the links in this article, bookstore pays small commission for the owner of this blog. This doesn’t cost you anything, but it supports the blog.

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