How to read a 10-K like a professional investor
If you want to be a great investor, you should like engaging with one of the essential tools in the trade: the 10-K. Warren Buffett has stated that he enjoys curling up with annual reports. Buffett said he "reads 500 pages every day" when asked how he became smarter. That's how, like compound interest, knowledge grows.
Indeed, savvy fund managers regard 10-Ks as riddles or treasure hunts, relishing the opportunity to pore over even the tiniest footnotes.
Individual investors may not have the same experience as a fund manager who reviews hundreds of these documents each year. This course is intended to assist individual investors in determining what to look for when selecting companies for their portfolios and analyzing the outlook for their present stock holdings.
Finally, if you don't appreciate the type of in-depth research discussed here, you should think about whether investing in individual stocks is the best use of your time. If you don't enjoy reading 10-Ks, you're probably not going to be a great investor.
We all love it. It's a passion we have. After watching these videos and reading my short ebook that is attached here, you may feel the same!
Warren Buffett has famously said that he reads 500 pages a day. Most of that reading is 10K filings of companies he is invested in or considering investing in. It is only recently that we can set up a brokerage account and trade stocks with paying a commission. That makes stock investing much more accessible to the average person. The stock market is one of the best places to invest money for long-term growth and to create wealth.
But it's important that we know about the companies we invest in if we want to make informed decisions and protect and grow our portfolio.
Understanding how to read and decipher a 10K annual financial report is a critical skill set from becoming a knowledgable and capable investor.
You will learn how to use financial statements and properly evaluate any firm's financial health, to instantly determine if a firm has a strong or weak balance sheet and evaluate profitability. You will know how to calculate financial ratios, and you will understand what the financial ratios mean and what to notice.
Annual reports are marketing documents for investors that companies put out, which includes photos, a letter from the chair or CEO, and a summary financial overview.
These reports are similar to 10-K reports that are submitted to the Securities and Exchange Commission (SEC), but the 10-K reports are longer and more detailed.
When it comes to analyzing a 10-K annual report, the first place to start is to read Item 1, then Items 7 and 8.
Potential investors should also read the risk factors section associated with the company, including litigation and customer-concentration.
Learn how to read and understand the financial and strategic information detailed in a 10K.
Make more informed investment decisions.
The time to start is now!
