The Warren Buffett Way: The World’s Greatest Investor

Investing Guidelines: Management Tenets 107

were they realized? Also compare strategies of a few years ago to this
year’s strategies and ideas: How has the thinking changed? Buffett also
suggests that it can be very valuable to compare annual reports of the
company you are interested in with reports from similar companies in
the same industry. It is not always easy to f ind exact duplicates, but even
relative performance comparison can yield insights.

Expand your reading horizons. Be alert for articles in newspapers
and f inancial magazines about the company you are interested in and
about its industry in general. Read what the company’s executives have
to say and what others say about them. If you notice that the chairman
recently made a speech or presentation, get a copy from the investor
relations department and study it carefully. Make use of the company’s
web pages for up-to-the-minute information. In every way you can
think of, raise your antennae. The more you develop the habit of staying
alert for information, the easier the process will become.
It must be said here, with sadness, that it is possible that the docu-
ments you study are f illed with inf lated numbers, half-truths, and de-
liberate obfuscations. We all know the names of the companies charged
with doing this; they are a rogue’s gallery of American businesses, and
some of their leaders are f inding themselves with lots of time in prison
to rethink their actions. Sometimes the manipulations are so skillful
that even forensic accountants are fooled; how then can you, an investor
without any special knowledge, fully understand what you are seeing?
The regrettable answer is, you cannot. You can learn how to read
annual reports and balance sheets—and you should—but if they are
based on f lagrant deception and lies, you might not be able to detect it.

I read annual reports of the company I’m looking at and I read

the annual reports of the competitors. That’s the main source

material.

WARRENBUFFETT, 1993

We like to keep things simple, so the chairman can sit around

and read annual reports.^32

CHARLIEMUNGER, 1993