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Lessons From Warren Buffett

Lessons From Warren Buffett: Which Annual Reports Are Worth Reading?

There are so many public companies, each producing an annual report, that it can overwhelming as to where to start if you want read annual reports. Warren Buffett uses a very simple approach, he starts with reading the reports of companies that he understands and avoids the rest. How valuable is an annual report? Buffett believes it has all you need to know in order to decide whether to buy a stock. He cites his purchase of Coca-Cola stock as a prime example.

“We start by looking at the reports of companies that we think we can understand,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “And then we see from that report whether the management is telling us about the things that we would want to know about if we owned a hundred percent of the company. . . . For example, I would say that the Coca-Cola annual report over the last good many years is an enormously informative document. I mean, I can’t think of any way if I’d have a conversation with Roberto Goizueta, or now Doug Ivester, and they were telling me about the business, they would not be telling me more than I get from reading that annual report. We bought that stock based on an annual report. We did not buy it based on any conversation of any kind with the top management of Coca-Cola before we bought our interest. We simply bought it based on reading the annual report, plus our knowledge of how the business worked.”

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© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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