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Brian Feroldi Profile picture
@BrianFeroldi
Oct 25, 2023 • 10 tweets • 3 min read • Read on X
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If you buy individual stocks, you MUST understand accounting.

These 7 infographics will help you master balance sheet analysis:

1: Balance Sheet Overview Image
2: Balance Sheet Questions to Ask: Image
3: The 4 ways companies raise capital, and how they impact the balance sheet Image
4: Balance Sheet ratios to watch: Image
5: Balance Sheet Green Flags Image
Want to go deeper into accounting?

Join my upcoming cohort-based course, Advanced Financial Statements Analysis.

Details here:

Interested? DM me for a coupon code. maven.com/brian-feroldi/…
Image
6: How the balance sheet & income statement link: Image
7: Warren Buffett's Balance Sheet rules of thumb: Image
Enjoy this thread? Follow me @brianferoldi

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More from @BrianFeroldi

Brian Feroldi Profile picture
Apr 25
Capitalism is brutal.

If you invest, you MUST know how to identify a moat.

Here are 9 financial “rules of thumb” that Warren Buffett uses to tell if a company has one: Image
1: Gross Margin

Found: Income Statement

Formula: Gross Profit / Revenue

Moat: Consistently above 40%

No Moat: Under 40% & volatile Image
Buffett’s logic:

A consistently high gross margin signals that the company isn’t competing exclusively on price.

A high gross margin also provides ample gross profit to pay expenses and leaves money for shareholders.
Read 24 tweets
Brian Feroldi Profile picture
Apr 24
Peter Lynch LOVED the PEG ratio.

It used to be a great metric.

Now, it SUCKS.

Here’s why it became a USELESS number: Image
Assume you’re considering investing in one of three companies.

Which is the better buy? Image
This is where the PEG ratio is useful. PEG stands for “Price-to-Earnings-to-Growth”.

Divide the trailing P/E ratio by the estimated 5-year earnings growth rate.

The lower the number, the better.

The PEG makes it clear that Company ZYX is the best choice. Image
Read 14 tweets
Brian Feroldi Profile picture
Apr 22
Tom Engle has lived off of his portfolio for 40 years (!!!)

How? He's an incredible investor with a BRILLIANT cash management strategy.

Here's exactly how it works (step by step): Image
Let's say Tom's portfolio is worth $100,000 in the middle of a bull market.

Tom is happy with this number and wants to protect it.

He mentally calls this $100,000 his "protected value."

All his cash management decisions are based on this number. Image
Tom always keeps an eye on the macro and has a feel for if the market is:

▪️Under-valued
▪️Fairly-valued
▪️Over-valued

Tom keeps ~12% of his "protected value" in cash in a fairly-valued market.

That's $12,000 Image
Read 17 tweets
Brian Feroldi Profile picture
Apr 21
"Everyone is trying to be smart, I'm just trying NOT to be stupid."

- Charlie Munger

Here are the 10 MOST COMMON investing mistakes to avoid like the plague (visually): Image
1. Short-term focus

New investors are fooled by market randomness.

Stock UP? “I’m a genius.”
Stock DOWN? “Investing is impossible.”

Experienced investors know that returns are measured in YEARS, not DAYS Image
2: Ignoring personal finance

New investors think that buying stocks will FIX their personal finances.

Experienced investors don't invest until their personal finances are rock-solid. Image
Read 13 tweets
Brian Feroldi Profile picture
Apr 20
I've been investing for 21 years.

Here are 21 lessons I've had to learn the hard way.

1/ You’re going to be wrong. A lot. Image
2/ Consistently avoiding ruin is the most underrated financial skill.

3/ The desire to hold a loser until you “break even” is incredibly strong.

4/ When prices are rising, investors wish for a bear market. When a bear market appears, investors wish for it to end.
5/ The biggest factor that will impact your returns is your holding period.

6/ Panic selling once can destroy years of good decisions in seconds.

7/ Losing money hurts three times more than making money feels good.

8/ Interest rates matter. A lot.
Read 8 tweets
Brian Feroldi Profile picture
Apr 19
10 powerful visuals every investor should memorize:

1: Dollar-cost averaging makes market timing irrelevant. Image
2: Cash is short-term safe but long-term risky.

Stocks are short-term risky but long-term safe. Image
3: Expect the market to play all kinds of mind tricks on your emotions: Image
Read 12 tweets

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