This is a terrific video. I didn't go to business school, read Warren Buffett extensively. These rules were always mentioned but never really explained. What might make a good video would be to look at Apple after the introduction of the iPhone in 2007. I invested in 2008, rode out the crash no problem, did great over many years. The first few years of my investment in Apple ALL the business news I found just repeated over and over again, "Apple has almost the entire 35% of the high end cell phone business in the U.S. Who else can they sell iPhones to? As though they'd saturated the entire potential market. I still had a Finnish Nokia. This just seemed odd. I wondered, am I missing something? One of my main reasons for investing in Apple was I expected them to expand iPhone sales around the world. (I had no clue about how to analyze their balance sheet.) So then Buffett and Berkshire in 2012 invested in IBM. Did that follow these rules of thumb? (My reaction was to wonder, did I miss something? Then I thought, no, maybe that's business computers which was separate from smartphones.) In 2016 Buffett said IBM had been a mistake, sold their position off at a loss, and then invested in Apple. (Did the Rules apply to either of these?) And in about 2019 Buffett said he wished Berkshire could buy all of Apple. And the recent Berkshire sell off of a significant portion of their position in Apple. Did that follow the Rules? In no way am I trying to say these Rules aren't powerful, just that until now I didn't have a clue how to apply them.
I really love this kind of no BS straight to the point content. I am always confused what the different US balance sheet terms mean and this brought me a step closer to understanding. Thank you!
1.Cash to debt: more cash than debt 2.Debt to equity ratio : below 0.8 Preferred stock is zero 4. Retained earnings growing consistently ( even during recessions) 5. Has treasury stock ( cumulative sharebuy backs)
Very informative. I took a course on this in uni but only understood it in theory. Now after having worked for others and started my own business, I can appreciate it for what it is.
In his early years, Warren Buffett concentrated heavily on balance sheet fundamentals, often seeking undervalued companies with strong assets relative to their market price. Over time, his approach evolved to more focus on the quality of businesses and their long-term earnings power, recognizing that sustainable competitive advantages and robust cash flows are key drivers of superior investment returns. This shift reflects Buffett as an investor was primarily due to Charlie Munger influence and also larger amount of money under management.
This. He started strongly based on ideas of his tutor Ben Graham. But shifted into emphasizing the business value of a company. Never only rely on fundamentals because they only reflect the past. It is only one column in evaluating a business. Buffet is addressing business value with his "moat" theory and also with his "stay in your field of competence".
ok I am taking up the lulu challenge. Give me a minute..PE ratio is low, on the very low end of its annual price range, earnings growing each year, net profit margin is 16% (firat thing i dont like, it means there is no monopoly), ROC and ROA are very high. I would say this a strong buy, amd you can set a target of usd500 per share.
Very good series. This is along with income statement analysis and cash flow statement analysis help to figure out the value stocks with strong Moat. Thanks.
Jonas Herman, a licensed fiduciary is the brain behind my success. I've gotten into a plethora of assets with $16k spread across stocks (options and futures) for the short term and Roth IRA, index funds, and ETFs, for the long term. Now with over 81k in roi, I sit back and just reinvest at intervals while I handle my other businesses.
To me, investing is not worth it and I know that's the same mindset holding me back from taking a step forward in my finances. It’s all gambling. Maybe it’s because I'm new to it, I can't tell.
You said on rule one that Chipotle has no debt, but then turn around and use the liabilities and debt/equity ratio line item for rule two. Could you explain that?
Yeah I thought about that too .. unless he specifically defines what type of debt we are talking about ! Btw, in a diff comment he replied to another user mentioning that debt is "borrowings" .. so I guess he jyst means loans etc..
Chipotle’s “debt” is operating least liabilities. While that is a liability. I don’t consider it to be debt. Hence, why I excluded it from one, but included it in the other.
@@gojo252seems to me like they would just however you look at it it shows that a company is confidently looking to maintain its property’s therefore expanding so that would mean growth, i assume that’s why he doesn’t count that as an actual “liability”
it helped alot thank you so much for sharing this information i hope you earn millions of subscribers just because you are doing a great job by providing such informative knowledge
What is the difference in debts and liabilities in this case? Usually they are both the same and i've never seen a balance sheet that lists them differently.
Thanks for the video, Brian. Can you more deeply explain why stock buyback is a negative number in the equity section? I would have thought it would be considered a positive asset, just as if the company had bought stock in a third party/external company. Where can the positive asset value of these buyback shares be found in the balance sheet?
Thx Brian - just got into investment and this will make my decision more intelligent and confirm some of my predictions. You just earned a new subscriber!
Thanks for the great information.. Just an FYI moving forward... I believe a "/" is considered a forward slash (the way the top leans) and a "\" is a back slash. I found most people confuse the two, and more than most don't even care for the differentiation, but just an FYI in case you do presentations, etc.
This was very interesting stuff, for someone like me who’s new to investing. One question: In the Chipotle example you said they had no debt - however you later jumped to a point in their balance sheet where it showed a debt value and some debt ratios. Am I missing a subtlety in balance sheet interpretation, here?
Yea… this is an example of how accounting can be confusing. There’s a term called operating police liability, which many financial aggregators consider to be “debt”, hence why it’s listed as a liability. Since these are future at least payments, I do not consider them to be debt, just like I wouldn’t consider future salary payments to employees to be debt. Hope that helps.
About no5, when a company buys back stocks, treasury stocks, shouldn't it show with a negative figure on the balance sheet? Suppose a company repurchases 10,000 shares of its stock at $20 per share. The treasury stock entry on the balance sheet would be: Treasury Stoc k= (10,000 shares×$20)=−$200,000 (minus) - This amount shouldn't be subtracted from the total shareholders' equity?
2:42 hello sir, regarding preferred stocks, I would think investors love them in retirement because they won't crash like the magnificent 7 and they pay a steady predictable dividends. I'm thinking of buying more prefered stocks instead because I'm now retired..
I'm confused about the part where you said Chipotle had no debt, It states they did have an accounts payable of 197.6 in Dec 23. Accounts Payable is a type of short term debt that is owed to suppliers etc.
Hi, Thanks for making the video. What's the source of these 5 rules of thumb? How have you been able to attribute these to Buffett? Which book? Which letter? Which interview? Thanks,
Sounds more like a checklist for companies ripe for purchase then liquidation. Not necessarily just for investment. Got to remember who we are talking about: Buffett.
I still don't fully understand the thing about Treasury Stock. In the first example of some fictive company, the amount showed positive value and Buffet's rule says the value should be greater than 0. In the example of Chipotle, the Treasury Stock showed negative amount. Given that this actually represents the amount of stock buyback that company does, normally it would be treated as a expense and having negative amount be a good thing makes sense. So I'm wondering now, why did that first example show positive amount? Can it happen that amount is positive and what does it mean? Also, when talking about Buffet's rule regarding this, are we talking about the absolute value?
Absolute value. Buffett wants to see that a company is buying back stock. However, since treasury stock is a Contra equity, it is listed as a negative number so you have to take the absolute value
Fair question. Since we are only looking at cash, accounts payable is usually offset by accounts receivable. However, these are just rules of thumb and there’s always more nuance needed.
00:00 Introduction and Purpose 00:32 Understanding the Balance Sheet 00:54 Rule of Thumb #1: Cash vs. Debt 01:33 Rule of Thumb #2: Debt to Equity Ratio 02:16 Rule of Thumb #3: Preferred Stock 03:00 Rule of Thumb #4: Retained Earnings Growth 03:50 Rule of Thumb #5: Treasury Stock 04:35 Analyzing Chipotle's Balance Sheet 07:01 Final Evaluation of Chipotle by GPT Breeze
Purchasing a stock may seem straightforward, but selecting the correct stock without a proven strategy can be exceedingly challenging. I've been working on expanding my $210K portfolio for a while, and my primary obstacle is the lack of clear entry and exit strategies. Any advice on this matter would be greatly appreciated.
@@dimitristripakis7364 Look both at the financials than you look at sources that provide insights. Remember trust it’s transparent and built over time. Don’t be in a hurry the truth always surfaces over time. May the force be with you. Rome wasn’t built in a day.
It should be audited by some reliable audit company such as EY, PwC, KPMG or Deloitte. Their job is to check for major inaccuracies in the balance sheet. There used to be five of them, but the fifth one went out of business after they failed to recognise fraud of one of the firms they reviewed (Enron), so it seems the others do their job better
Cash to short term debt. The company must be able to repay all due debt in time. Long term debt will be payed with revenue and cash flow from other years, and not with cash.
You claim that buffet doesn't like to see preferred stock on the balance sheet and his favourite way to invest in companies is by... You guessed it... Preferred stock 😂 he's the best
Correct -- he likes to invest in it because its can be very favorable to the INVESTOR, not the COMPANY. Hence why him seeing preferred stock on a balance sheet is a turnoff.
Yes, he has OWNED special preferred stock in the past. However, that doesn't mean he like to see it on a company's balance sheet. C onsider why those companies had to issue preferred stock -- they were desperate for capital!
I think this would be an excellent idea for the community. You should pick two stocks a week and use this formula to examine the stocks we suggest in the comments!
Yes, Warren, that's great. But a balance sheet tells us what the company is doing TODAY. That has already been built into the share price because everyone knows it. What we need is to figure out what the company will be doing TOMORROW. That is not on the balance sheet.
Well, in that case you’re probably better off investing the money in Chipotle stocks rather than in their food 🌮 - better return on investment and no diarrhoea
Debt to equity equals total liabilities divided by debt? Really? I guess anyone can publish a CZcams video as an expert. There are liabilities that are not debt.
Thanks for watching! Download a free copy of Buffett’s rules of thumb here: longtermmindset.co/buffett
This is a terrific video. I didn't go to business school, read Warren Buffett extensively. These rules were always mentioned but never really explained.
What might make a good video would be to look at Apple after the introduction of the iPhone in 2007.
I invested in 2008, rode out the crash no problem, did great over many years. The first few years of my investment in Apple ALL the business news I found just repeated over and over again, "Apple has almost the entire 35% of the high end cell phone business in the U.S. Who else can they sell iPhones to? As though they'd saturated the entire potential market. I still had a Finnish Nokia. This just seemed odd. I wondered, am I missing something? One of my main reasons for investing in Apple was I expected them to expand iPhone sales around the world. (I had no clue about how to analyze their balance sheet.)
So then Buffett and Berkshire in 2012 invested in IBM. Did that follow these rules of thumb? (My reaction was to wonder, did I miss something? Then I thought, no, maybe that's business computers which was separate from smartphones.)
In 2016 Buffett said IBM had been a mistake, sold their position off at a loss, and then invested in Apple. (Did the Rules apply to either of these?) And in about 2019 Buffett said he wished Berkshire could buy all of Apple.
And the recent Berkshire sell off of a significant portion of their position in Apple. Did that follow the Rules?
In no way am I trying to say these Rules aren't powerful, just that until now I didn't have a clue how to apply them.
I really love this kind of no BS straight to the point content. I am always confused what the different US balance sheet terms mean and this brought me a step closer to understanding. Thank you!
Glad it was helpful
1.Cash to debt: more cash than debt
2.Debt to equity ratio : below 0.8
Preferred stock is zero
4. Retained earnings growing consistently ( even during recessions)
5. Has treasury stock ( cumulative sharebuy backs)
You missed 3 lol
Thank you...🇺🇸 👍☕
Very informative. I took a course on this in uni but only understood it in theory. Now after having worked for others and started my own business, I can appreciate it for what it is.
Glad it was helpful!
In his early years, Warren Buffett concentrated heavily on balance sheet fundamentals, often seeking undervalued companies with strong assets relative to their market price. Over time, his approach evolved to more focus on the quality of businesses and their long-term earnings power, recognizing that sustainable competitive advantages and robust cash flows are key drivers of superior investment returns. This shift reflects Buffett as an investor was primarily due to Charlie Munger influence and also larger amount of money under management.
Yup. Very true
This. He started strongly based on ideas of his tutor Ben Graham. But shifted into emphasizing the business value of a company. Never only rely on fundamentals because they only reflect the past. It is only one column in evaluating a business. Buffet is addressing business value with his "moat" theory and also with his "stay in your field of competence".
@@rokker333 in the past he was more quantitative but now prefers more quality investing.
Thanks for the straight to the point explanation. For for someone with no idea of accounting, this short video is extremely helpful.
Cheers!
Just ran through lululemon's balance sheet with Buffett's rules of thumb and my conviction just got stronger. Thanks for the video!
Great job!
Long lululemon?
I’m looking at the same stock. I have lululemon undervalued. Their balance sheet and return on capital is strong
@edsontrujillo2247 Yes. My target is around $300-$320
ok I am taking up the lulu challenge. Give me a minute..PE ratio is low, on the very low end of its annual price range, earnings growing each year, net profit margin is 16% (firat thing i dont like, it means there is no monopoly), ROC and ROA are very high. I would say this a strong buy, amd you can set a target of usd500 per share.
i think this is the most important to start looking at because it gives a good picture of the company debt + equity to asset ratios before buying in
Love this format! Please make more financial statements analysis content !
Will do!
@@BrianFeroldiYTand create a playlist so we can go directly to it highlight 10 ten companies and some with great potienal.
Thanks for this. Very useful for beginner investors like me
Glad it was helpful!
@@MoneyMathai It’s always good to return to basic fundamentals in just about anything we can. For an older investor like myself, it was refreshing.
just joined your VIP group, and I'm already seeing some amazing results. Your insights are truly invaluable!
Debt to equity ratio = Total debt/equity, not Total liabilities/equity
Hey Brian, just wanted to say great video, and thank you for providing the little working example at the end, liked and new subscriber lol
Thank you for making this process so easy to follow
You are so welcome!
Very good series. This is along with income statement analysis and cash flow statement analysis help to figure out the value stocks with strong Moat. Thanks.
Glad you enjoy it!
Investing has been rather rewarding to me and I've learned that getting a good return is very much attainable if you know your way around it.
How are you doing it and what did you invest in? I can tell you that not everyone is as lucky as you are.
Jonas Herman, a licensed fiduciary is the brain behind my success. I've gotten into a plethora of assets with $16k spread across stocks (options and futures) for the short term and Roth IRA, index funds, and ETFs, for the long term. Now with over 81k in roi, I sit back and just reinvest at intervals while I handle my other businesses.
To me, investing is not worth it and I know that's the same mindset holding me back from taking a step forward in my finances. It’s all gambling. Maybe it’s because I'm new to it, I can't tell.
@@Rmorales799 Can he help me? I turn 53 soon. I hope it's not too late for me.
@@Baptisizm Can he help me? I turn 53 soon. I hope it's not too late for me.
What’s the website you use for checking financial data, fincheck?
Finchat
You said on rule one that Chipotle has no debt, but then turn around and use the liabilities and debt/equity ratio line item for rule two. Could you explain that?
Yeah I thought about that too .. unless he specifically defines what type of debt we are talking about !
Btw, in a diff comment he replied to another user mentioning that debt is "borrowings" .. so I guess he jyst means loans etc..
Chipotle’s “debt” is operating least liabilities. While that is a liability. I don’t consider it to be debt. Hence, why I excluded it from one, but included it in the other.
I dont undestend, they dont have to pay off long term liabilities?
@@BrianFeroldiYT, Hi, please whete did you find information that is lease liabilities? Whete i can find or look that information? Thank you
@@gojo252seems to me like they would just however you look at it it shows that a company is confidently looking to maintain its property’s therefore expanding so that would mean growth, i assume that’s why he doesn’t count that as an actual “liability”
great video. Perfectly explained and very helpful, in my case, for my soon to be degree in business adm.
Fantastic!
These videos are just amazing! I’m definitely a huge fan! Learning a lot! Many thanks 😊
Great to hear!
Please explain how do you agree with debt to equity of the company according to Buffet"s rule
I think it’s a good rule of thumb
but dont a lot of companies cancel treasury stock after buying the stock back? This would then show up as zero.
Yes. They also sometimes just offset retained earnings, which makes it hard to find. Still, if you see it listed, its a good sign.
Also you would look at more than 1 years accounts so you would see the story of what happened
it helped alot thank you so much for sharing this information i hope you earn millions of subscribers just because you are doing a great job by providing such informative knowledge
Wow, thanks!
What is the difference in debts and liabilities in this case? Usually they are both the same and i've never seen a balance sheet that lists them differently.
Debt is what is borrowed and has to be paid back. Liabilities are bills that have to be paid.
Thanks for the video, Brian. Can you more deeply explain why stock buyback is a negative number in the equity section?
I would have thought it would be considered a positive asset, just as if the company had bought stock in a third party/external company. Where can the positive asset value of these buyback shares be found in the balance sheet?
Thx Brian - just got into investment and this will make my decision more intelligent and confirm some of my predictions. You just earned a new subscriber!
Excellent!
Amazing content !
Thanks!
Very helpful video. Thanks for posting!
Glad it was helpful!
Thanks for the great information.. Just an FYI moving forward... I believe a "/" is considered a forward slash (the way the top leans) and a "\" is a back slash. I found most people confuse the two, and more than most don't even care for the differentiation, but just an FYI in case you do presentations, etc.
Thanks for the info!
Thank you this is educating ❤
Thanks for watching
Thanks for the elegant explanation :)
Glad it was helpful!
This was very interesting stuff, for someone like me who’s new to investing. One question: In the Chipotle example you said they had no debt - however you later jumped to a point in their balance sheet where it showed a debt value and some debt ratios. Am I missing a subtlety in balance sheet interpretation, here?
Yea… this is an example of how accounting can be confusing. There’s a term called operating police liability, which many financial aggregators consider to be “debt”, hence why it’s listed as a liability. Since these are future at least payments, I do not consider them to be debt, just like I wouldn’t consider future salary payments to employees to be debt. Hope that helps.
About no5, when a company buys back stocks, treasury stocks, shouldn't it show with a negative figure on the balance sheet?
Suppose a company repurchases 10,000 shares of its stock at $20 per share. The treasury stock entry on the balance sheet would be:
Treasury Stoc k= (10,000 shares×$20)=−$200,000 (minus) - This amount shouldn't be subtracted from the total shareholders' equity?
Correct. Treasury stock is contra-equity.
Warren Buffett really has impressive know-how
Most investors would agree
Great video, thank you so much!
Thanks for watching!
2:42 hello sir, regarding preferred stocks, I would think investors love them in retirement because they won't crash like the magnificent 7 and they pay a steady predictable dividends. I'm thinking of buying more prefered stocks instead because I'm now retired..
Yes, preferred stock can be good for income, but its not good for the company
Thanks! Great! Why do you say “expecially" instead of "especially" ?
One of my many flaws….
Very clean explanations
Glad you think so!
I'm confused about the part where you said Chipotle had no debt, It states they did have an accounts payable of 197.6 in Dec 23. Accounts Payable is a type of short term debt that is owed to suppliers etc.
Great channel
Cheers!
Thank you, very interesting!
Hello everyone 👋🏼 may anybody tell me which program or website he uses to look the figures? Thanks in advance
Finchat.io/brian
Very helpful, thank you
Glad it was helpful!
Out of the big magnificent 7 stocks which two stock do you think has the best longterm growth outlook?
Hard to say. Depends on if you believe in AI or not.
If we're talking real world AI and long term growth than it's probably Tesla. But I'm also a bit biased.
@@BrianFeroldiYT I'm half way believing in AI lol
Hi,
Thanks for making the video.
What's the source of these 5 rules of thumb? How have you been able to attribute these to Buffett?
Which book? Which letter? Which interview?
Thanks,
Thanks Brian very helpful South Africa
Thanks for watching
Great info, thanks!
Glad it was helpful!
Can you analyze Microsoft and Palantir using these principles?
You sure can.
Sounds more like a checklist for companies ripe for purchase then liquidation. Not necessarily just for investment. Got to remember who we are talking about: Buffett.
Are you saying he buys a lot of companies and than liquidats them?
I still don't fully understand the thing about Treasury Stock. In the first example of some fictive company, the amount showed positive value and Buffet's rule says the value should be greater than 0. In the example of Chipotle, the Treasury Stock showed negative amount. Given that this actually represents the amount of stock buyback that company does, normally it would be treated as a expense and having negative amount be a good thing makes sense. So I'm wondering now, why did that first example show positive amount? Can it happen that amount is positive and what does it mean? Also, when talking about Buffet's rule regarding this, are we talking about the absolute value?
Absolute value. Buffett wants to see that a company is buying back stock. However, since treasury stock is a Contra equity, it is listed as a negative number so you have to take the absolute value
I’m curious from what you’ve shown here how can you tell that Chipotle has bought back shares?
Does anyone know what webpage/source this guy uses to look up Chipotle's financials?
Finchat.io/brian
Hey great video, but where does buffet say the things you say, that these are the metrocs he is looking for? Any video😮😂
Check out the books about him :)
Can you mention book name @@BrianFeroldiYT
Nice work ...Warren said one time that rend is equal to a long term load
rent?
thank you 🤝
Welcome 👍
Berkshire doesn't hold any Chipotle stock . Any partcular reason you can think of ?
Too expensive
what website do you use to search for that type of information? thank you
Finchat.io/brian
Should we include commercial debts
I think you should
1:15 Hello sir, for Rule 1, you only take the lines "short term debt" and "long term debt" but ignore the other lines?
All debt should be included - what was missed?
Why didnt you include accounts payable and other long-term liabilities? Is it just interest bedring debt you account for?
Everyone likes to put "Warren Buffet" in their videos. It guarantees views.
Hello, in which website you see the balance sheey?
Finchat.io
Well explained 👏
Thank you 🙂
Good video! Thanks
Glad you liked it!
Where did you load Chipotle's stock code? Fincheck????
Finchat.io
@@BrianFeroldiYT thank you, I enjoyed the video
What platform is he using to view the balance sheet the User interface looks great
Finchat.io/brian
Don’t put the man’s up there if we are not going to hear him talk.
When you mentioned that cash must be more than debt, do you mean short term borrowings only? why is accounts payable not part of it?
Fair question. Since we are only looking at cash, accounts payable is usually offset by accounts receivable. However, these are just rules of thumb and there’s always more nuance needed.
@@BrianFeroldiYTWrong.
00:00 Introduction and Purpose
00:32 Understanding the Balance Sheet
00:54 Rule of Thumb #1: Cash vs. Debt
01:33 Rule of Thumb #2: Debt to Equity Ratio
02:16 Rule of Thumb #3: Preferred Stock
03:00 Rule of Thumb #4: Retained Earnings Growth
03:50 Rule of Thumb #5: Treasury Stock
04:35 Analyzing Chipotle's Balance Sheet
07:01 Final Evaluation of Chipotle
by GPT Breeze
Purchasing a stock may seem straightforward, but selecting the correct stock without a proven strategy can be exceedingly challenging. I've been working on expanding my $210K portfolio for a while, and my primary obstacle is the lack of clear entry and exit strategies. Any advice on this matter would be greatly appreciated.
This is nice but how can you be sure that the balance sheet is honest ?
If you can’t trust the numbers, don’t invest
@@dimitristripakis7364 Look both at the financials than you look at sources that provide insights. Remember trust it’s transparent and built over time. Don’t be in a hurry the truth always surfaces over time. May the force be with you. Rome wasn’t built in a day.
It should be audited by some reliable audit company such as EY, PwC, KPMG or Deloitte. Their job is to check for major inaccuracies in the balance sheet. There used to be five of them, but the fifth one went out of business after they failed to recognise fraud of one of the firms they reviewed (Enron), so it seems the others do their job better
@@BrianFeroldiYT This is what a fraudster would say 😁
If the SEC catches them lying on the balance sheet people will go to jail.
This video goes really well up to 4:29, after that the author of this video just f.... Warren's rule of thumb 👍
How?
which website are you using to see this data
Cool video!
If the company cancels the treasury stocks, will the treasury stocks on the balance sheet go to zero?
It becomes a negative number, which is called a “contra equity”
Very nice looking forward to check it out
Hope you enjoy it!
Great video. Covers what you need to know.
Glad it was helpful!
Marvelous!
Glad you enjoyed it!
So currently, with share price tumbling, is CMG a strong buy ?
czcams.com/video/aSnOUXSs15s/video.htmlsi=mG_i5ey4n3zhY14a
I’m a wfxhes this for my learning wfforts
Cash to short term debt. The company must be able to repay all due debt in time. Long term debt will be payed with revenue and cash flow from other years, and not with cash.
Correct. But I still think it’s important that a company has more cash than total debt.
You claim that buffet doesn't like to see preferred stock on the balance sheet and his favourite way to invest in companies is by... You guessed it... Preferred stock 😂 he's the best
Correct -- he likes to invest in it because its can be very favorable to the INVESTOR, not the COMPANY. Hence why him seeing preferred stock on a balance sheet is a turnoff.
Is he particularly hostile to preferred stock or does he simply conceptualize it as debt? I thought the latter...
Oh. The name change finally occurred. Threw me off for a second there.
:) Its still us!
Does GAAP regard leases as debt?!
Its a liability. Companies have to record it as such, and many financial aggregators list it as debt. Its not.
@@BrianFeroldiYT if it’s more senior than equity, isn’t it legitimate to count it as debt?
Preferred Stock is misleading! Buffet owns large holdings of companies that have them - WFC, AMX, KO, etc…
Yes, he has OWNED special preferred stock in the past. However, that doesn't mean he like to see it on a company's balance sheet. C onsider why those companies had to issue preferred stock -- they were desperate for capital!
If debt is 0 for rule 1, how can debt over equity be 1.2, but not 0?
Because the “debt to equity” ratio has all liabilities in the numerator, not just debt
Product rate in stock cash use freelance
Why would Buffett want Treasury Stock to be positive? As your own example makes clear, this equity account goes negative when there are buybacks.
Stock of cash in support vat
I clicked on this video thinking we we're going to analyze a 10-k
Happy to do a video on that if there’s interest
Good
Thanks
ตามมาจาก short
I read he likes debt/equity at .50..
Source!
Capital gain borrow price
I think this would be an excellent idea for the community. You should pick two stocks a week and use this formula to examine the stocks we suggest in the comments!
Noted!
great explanation brian!
Glad it was helpful!
I think you forgot to mention 1 key thing… all these without high ROCE is of no use
ROCE is an important metric, but since you need more than the balance sheet to find it, I didn’t include it
@@BrianFeroldiYT oh right i agree. Didnt realize you were focusing only on BS. Great content though. Really good criteria mentioned
Yes, Warren, that's great. But a balance sheet tells us what the company is doing TODAY. That has already been built into the share price because everyone knows it. What we need is to figure out what the company will be doing TOMORROW. That is not on the balance sheet.
Correct
I’d love to invest in Chipotle stocks but I get explosive diarrhea every time I eat their food.
Well, in that case you’re probably better off investing the money in Chipotle stocks rather than in their food 🌮 - better return on investment and no diarrhoea
Debt to equity equals total liabilities divided by debt? Really? I guess anyone can publish a CZcams video as an expert. There are liabilities that are not debt.
What is the proof that these are Warren Buffet's rule of thumb when analyzing balance sheets?
Maybe these are some other people's rule of thumb?
They come from the book, Warren Buffett and the interpretation of financial statements, it was written by his former daughter-in-law