SECURITY ANALYSIS - FINANCIAL STATEMENTS (BY BENJAMIN GRAHAM)

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The bible of value investing. This is the second part of my summary of Security Analysis – Benjamin Graham & David Dodd’s legacy to up-and-coming investors. In this part we’ll cover the investor’s interest in the income statement and balance sheet of a company.

Playlist of the full Security Analysis series: http://bit.ly/2vNzkw7

Top 5 takeaways from Benjamin Graham’s Security Analysis:
00:00 Intro
01:22 1. Analyzing the income statement
05:06 2. 6 common ways to misrepresent earnings
10:09 3. What does it indicate for the future?
12:16 4. Analyzing the balance sheet
14:03 5. The importance of capitalization structure

TL;DW:

- The first priority of analyzing an income statement is to understand what the true earnings of the past have been
- There are many ways that earnings can be misrepresented. By being aware of these “tricks” the intelligent investor can adjust the historical figures for a more correct version
- Averages and long records make assumptions about future earnings more reliable
- Weed out weak companies by the careful study of balance sheets
- Some debt can actually be beneficial to the investor in common stocks, as his invested amount becomes more productive when a reasonable part of the capital is borrowed

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