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How does one learn to analyze these quarterly results and other financial reports (e.g., 10-K)? What books/videos/courses would take an absolute beginner toward

How does one learn to analyze these quarterly results and other financial reports (e.g., 10-K)? What books/videos/courses would take an absolute beginner towards becoming an expert? Would proper analysis of these results/other financial reports enable one to decide which company is a worthwhile investment? It seems like learning accounting would be a good start.

goler 5y ago
I recommend Aswath Damodaran's valuation course: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcasteqspr21.htm http://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcasteq... If you don't have time for the full course, I've also heard good things about Damodaran's Little Book of Valuation.
- srckinase123 5y ago
  Thanks for the course link. Does the course assume any prerequisites?
  - goler 5y ago
    Not really, but familiarity with accounting terms and some basic investment concepts helps. The course is designed for NYU MBA students and many of them have already taken corporate finance which gives them a head start. Damodaran puts all of the course info online (notes, lectures, emails to students, etc), though, which allows you to go at your own pace. The emails sometimes contain pointers to helpful supplemental materials. If you check out the email archives [1], you'll see that Damodaran wrote this in the first message: "1. Preclass work: I know that some of you are worried about the class but relax! If you can add, subtract, divide and multiply, you are pretty much home free… In are you have forgotten your accounting, I have added my version (which would probably not be approved of by your accounting professor) of an accounting class to my website: http://people.stern.nyu.edu/adamodar/New_Home_Page/webcastacctg.htm http://people.stern.nyu.edu/adamodar/New_Home_Page/webcastac... If you want to get a jump on the class, you can go to the class web page: http://people.stern.nyu.edu/adamodar/New_Home_Page/equity.html http://people.stern.nyu.edu/adamodar/New_Home_Page/equity.ht... " [1] http://people.stern.nyu.edu/adamodar/New_Home_Page/eqemail.html http://people.stern.nyu.edu/adamodar/New_Home_Page/eqemail.h...
    - srckinase123 5y ago
      Thanks for the detailed insight. Looks like a great wealth of information.
- malshe 5y ago
  This is a fantastic resource. I completed this course several years ago. He is a prolific teacher.
ericjang 5y ago
Martin Shkreli (yes, The pharma bro) has an excellent set of youtube tutorials on reading 10-k and 10-q forms to compile DCF valuation models. His video series focuses on household tech names here's the first one in the series: https://www.youtube.com/watch?v=VI_riscmviI https://www.youtube.com/watch?v=VI_riscmviI
- srckinase123 5y ago
  Thanks for the link. If I remember, there was one Shkreli video where he mentions if you are not working at a hedge fund using large sums of other people's money, then the amount of profit one would make actively investing their own money is not worth the amount of research it takes to make informative investments. Not sure if that is exactly what he said, so don't quote me on it. What's your take on retail investors and active investing, assuming that the retail investor does not have access to large sums of money.
  - ericjang 5y ago
    > if you are not working at a hedge fund using large sums of other people's money, then the amount of profit one would make actively investing their own money is not worth the amount of research it takes to make informative investments I think it's worth working out the math for yourself, rather than taking anyone's words for granted. Let's say the average annualized return of S&P500 is 10% (obviously, past returns are no guarantees of future returns). If you buy and hold, then you essentially pay no taxes on your capital gains. Let's suppose the alternative is to actively trade, and your strategy involves holding securities < 1 year, incurring the maximum short term capital gains of 37%. Let's say your strategy generates an annualized average return of 20%, pre-tax. So the annualized net worth (after capital gains taxes) starting from $100 would be: passive: 100, 110, 121, 133 active: 100, 112, 126, 141 So you can generate 10% excess returns, after taxes you compound approximately 2% additional take-home money each year. Then you should ask yourself, is it worth the hassle? Maybe it is. Maybe it isn't. Some people enjoy researching companies, making predictions, and allocating capital to their beliefs. obviously, there are ways to try and mitigate capital gains taxes - incorporating offshore LLCs, tax loss harvesting, etc. those are important considerations when designing an active trading strategy. Separately from whether active investing is worth it or not, I think it's valuable to learn how to read financial reports and understand businesses as a projected set of cash flows, along with understanding things like balance sheets and incomes. Learning to read 10-Qs has helped me think of my own budget / personal finance planning much like a business. Financial literacy is super important, even if you are a passive investor.

goler 5y ago

I recommend Aswath Damodaran's valuation course: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcasteqspr21.htm http://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcasteq... If you don't have time for the full course, I've also heard good things about Damodaran's Little Book of Valuation.

srckinase123 5y ago
Thanks for the course link. Does the course assume any prerequisites?
- goler 5y ago
  Not really, but familiarity with accounting terms and some basic investment concepts helps. The course is designed for NYU MBA students and many of them have already taken corporate finance which gives them a head start. Damodaran puts all of the course info online (notes, lectures, emails to students, etc), though, which allows you to go at your own pace. The emails sometimes contain pointers to helpful supplemental materials. If you check out the email archives [1], you'll see that Damodaran wrote this in the first message: "1. Preclass work: I know that some of you are worried about the class but relax! If you can add, subtract, divide and multiply, you are pretty much home free… In are you have forgotten your accounting, I have added my version (which would probably not be approved of by your accounting professor) of an accounting class to my website: http://people.stern.nyu.edu/adamodar/New_Home_Page/webcastacctg.htm http://people.stern.nyu.edu/adamodar/New_Home_Page/webcastac... If you want to get a jump on the class, you can go to the class web page: http://people.stern.nyu.edu/adamodar/New_Home_Page/equity.html http://people.stern.nyu.edu/adamodar/New_Home_Page/equity.ht... " [1] http://people.stern.nyu.edu/adamodar/New_Home_Page/eqemail.html http://people.stern.nyu.edu/adamodar/New_Home_Page/eqemail.h...
  - srckinase123 5y ago
    Thanks for the detailed insight. Looks like a great wealth of information.
malshe 5y ago
This is a fantastic resource. I completed this course several years ago. He is a prolific teacher.

ericjang 5y ago

Martin Shkreli (yes, The pharma bro) has an excellent set of youtube tutorials on reading 10-k and 10-q forms to compile DCF valuation models. His video series focuses on household tech names here's the first one in the series: https://www.youtube.com/watch?v=VI_riscmviI https://www.youtube.com/watch?v=VI_riscmviI

srckinase123 5y ago
Thanks for the link. If I remember, there was one Shkreli video where he mentions if you are not working at a hedge fund using large sums of other people's money, then the amount of profit one would make actively investing their own money is not worth the amount of research it takes to make informative investments. Not sure if that is exactly what he said, so don't quote me on it. What's your take on retail investors and active investing, assuming that the retail investor does not have access to large sums of money.
- ericjang 5y ago
  > if you are not working at a hedge fund using large sums of other people's money, then the amount of profit one would make actively investing their own money is not worth the amount of research it takes to make informative investments I think it's worth working out the math for yourself, rather than taking anyone's words for granted. Let's say the average annualized return of S&P500 is 10% (obviously, past returns are no guarantees of future returns). If you buy and hold, then you essentially pay no taxes on your capital gains. Let's suppose the alternative is to actively trade, and your strategy involves holding securities < 1 year, incurring the maximum short term capital gains of 37%. Let's say your strategy generates an annualized average return of 20%, pre-tax. So the annualized net worth (after capital gains taxes) starting from $100 would be: passive: 100, 110, 121, 133 active: 100, 112, 126, 141 So you can generate 10% excess returns, after taxes you compound approximately 2% additional take-home money each year. Then you should ask yourself, is it worth the hassle? Maybe it is. Maybe it isn't. Some people enjoy researching companies, making predictions, and allocating capital to their beliefs. obviously, there are ways to try and mitigate capital gains taxes - incorporating offshore LLCs, tax loss harvesting, etc. those are important considerations when designing an active trading strategy. Separately from whether active investing is worth it or not, I think it's valuable to learn how to read financial reports and understand businesses as a projected set of cash flows, along with understanding things like balance sheets and incomes. Learning to read 10-Qs has helped me think of my own budget / personal finance planning much like a business. Financial literacy is super important, even if you are a passive investor.