🔎 How To Analyze a 10-K

Warren Buffett explained his secret to success:

“I just sit in my office and read all day.”

But what does he read?

Annual reports, known as 10-K in the US.

Let's break down how to analyze a 10-K.

We'll use $AAPL as an example.





Key sections of a 10-K:

The typical structure follows this format:

• PART I: Business and risk factors.

• PART II: Financial statements and management’s analysis.

• PART III: Executive compensation and security ownership.

Here's $AAPL's 10-K.

Peter Lynch is a legendary investor.

He outlined 6 stock categories you MUST know:

🚀 Fast Growers $SHOP $TSLA
🏰 Stalwarts $HD $V
🐢 Slow Growers $JNJ $PG
🔄 Turnarounds $META $PTON
🎢 Cyclicals $BA $CAT
💼 Asset Plays $BRK $IBM

Here is his playbook for each category 👇 🚀 Fast Growers (like $TSLA, $SHOP)

Playbook: Allocate only a limited portion of your portfolio due to higher risk.

This is Lynch's preferred category:

📈 High Growth Rate (> 20%).
⚖️ Potentially Overvalued.
🏆 Can be huge winners.
⚠️ Risk-Prone.
🦁 Aggressive.
💡 Innovative.

$AAPL Apple Q2 FY23:

• Revenue -3% Y/Y to $94.8B ($2B beat).
💳 Services +5% Y/Y to $73.9B.
📱 Products -5% Y/Y to $20.9B.
• Operating margin 30% (-1pp Y/Y).
• EPS $1.52 ($0.09 beat).
• Stock buyback plan authorized up to $90B. twitter.com/i/web/status/1… $AAPL Apple revenue breakdown.

💰 How does stock-based compensation work?

Learn how it impacts:

🏢 companies,
💁 employees,
💵 & investors.

Discover all you need to know in our guide. 👇📚 💡 “Show me the incentive and I will show you the outcome.”

Charlie Munger's famous quote underscores the importance of stock-based compensation (SBC) in today's corporate finance landscape.

$NVDA NVIDIA announced a LOT of stuff today.

The company's keynote was centered on AI.

Here is what we've learned ⬇️ 1) NVIDIA DGX Cloud.

They call it "an AI Factory in the Cloud."

It's the world’s first AI supercomputer in the cloud, a multi-node AI-training-as-a-service solution optimized for the unique demands of enterprise AI.

Google just released an article on Generative AI.

This technology has the potential to revolutionize various industries, from art to medicine.

Here is what we've learned. $GOOG Google Cloud will launch generative AI products to empower developers with enterprise-level safety, security, and privacy.

This includes:

• Generative AI support in Vertex AI.
• Generative AI App Builder for easily building custom apps.

Meta just provided an update on its "year of efficiency." $META

• Flatter is faster.
• Leaner is better.
• Keep technology the main thing.
• Invest in tools to get more efficient.
• In-person time helps build relationships. $META's restructurings are expected by May.

They will include flattening the org, canceling lower-priority projects, and reducing hiring rates.

• 10,000 existing roles impacted.
• 5,000 open roles reduction.

For context, Meta had 86,482 employees as of the end of 2022.

$CRWD CrowdStrike Q4 FY23:

📊 ARR +48% Y/Y to $2.56B.
📈 Net new ARR $222M (+9% Q/Q).
🔒 Net Retention rate > 125%.
🧑‍🤝‍🧑 Sub. customers +41% Y/Y to 23K.

• Revenue +48% to $637M ($11M beat).
• Non-GAAP EPS $0.47 ($0.04 beat). $CRWD Q4 FY23 margins:

• GAAP operating margin -10% (-4pp Y/Y).
• Non-GAAP operating margin 15% (-4pp Y/Y).
• Free cash flow margin 33% (+3pp Y/Y).

SBC 24% of revenue (+2pp Y/Y).

App Economy Portfolio update 1/2023:

Returns from 1/2015 to 1/2023: +238%.

(vs. +96% for $SPY).

Portfolio > 50% off its peak.

Some long-term winners:

📱 $AAPL
↗️ $AMD
☁️ $AMZN
🔍 $GOOG
📢 $HUBS
🌿 $MDB
💕 $MTCH
🍿 $NFLX
💵 $PAYC
🛍️ $SHOP
🖥️ $TTD App Economy Portfolio allocation 1/2023:

• Top 10 Holdings: 45% of the portfolio.
• Median Market Cap: $15B.
• Average Market Cap: $231B.
• Average Insider Ownership: 6%.
• Average CEO score on Glassdoor: 91%.

29 stocks in the portfolio are rated 'BUY.'

Financial statements are intimidating.

So I built visuals to help you digest them.

There are 3 main statements to know:

💡 Income Statement
⚖️ Balance Sheet
💵 Cash flow Statement

I use Apple $AAPL as an example. 💡 Income Statement

Also called Profit & Loss statement (P&L).

It shows a company's revenue and expenses over a specific period, resulting in a net profit or loss.

It includes:

• Revenue (the "top line").
• Net income (the "bottom line").

And everything in between.

$NFLX Netflix Q4 FY22:

Key metrics:

• Subs +7.7M Q/Q (3.2M beat).
• ARM +5% Y/Y fx neutral.
• Revenue +2% Y/Y to $7.9B (in-line)
• Operating margin 7% (3pp beat).
• EPS $0.12 ($0.38 miss).

Q1 FY23 Guidance:

• Revenue +4% Y/Y (+8% fx neutral).
• Operating margin 20%. $NFLX Leadership update:

Ted Sarandos & Greg Peters ➡ co-CEOs.
Reed Hastings ➡ Executive Chairman.

App Economy Portfolio update 11/2022:

Returns from 1/2015 to 11/2022: +174%.

(vs. +98% for $SPY).

Portfolio down > 50%.

Stay strong out there!

Some winners:

📱 $AAPL
↗️ $AMD
☁️ $AMZN
🔍 $GOOG
📢 $HUBS
🌿 $MDB
💕 $MTCH
💵 $PAYC
🛍️ $SHOP
🖥️ $TTD App Economy Portfolio allocation 11/2022:

• Top 10 Holdings: 46% of the portfolio
• Median Market Cap: $11B
• Average Market Cap: $256B
• Average Insider Ownership: 5%
• Average CEO score on Glassdoor: 91%

28 stocks in the portfolio are rated 'BUY.'

$CRWD CrowdStrike Q3 FY23:

Key metrics:

📊 ARR +54% Y/Y to $2.34B.
📈 Net new ARR $198M (+9% Q/Q).
🔒 Net Retention rate > 120%.
🧑‍🤝‍🧑 Sub. customers +44% Y/Y to 21K.

• Revenue +53% to $581M ($6M beat).
• Non-GAAP EPS $0.40 ($0.08 beat). $CRWD Q3 FY23 Margins:

• GAAP operating margin -10% (+1pp Y/Y).
• Non-GAAP operating margin 15% (+2pp Y/Y).
• Free cash flow margin 30% (-2pp Y/Y).

App Economy Portfolio update 10/2022:

Returns from 1/2015 to 10/2022: +160%.

(vs. +88% for $SPY).

Portfolio down > 50%.

Stay strong out there!

Some winners:

📱 $AAPL
↗️ $AMD
☁️ $AMZN
🛡️ $CRWD
🔍 $GOOG
📢 $HUBS
🌿 $MDB
💕 $MTCH
💵 $PAYC
🛒 $SHOP
🖥️ $TTD App Economy Portfolio allocation 10/2022:

• Top 10 Holdings: 47% of the portfolio
• Median Market Cap: $12B
• Average Market Cap: $247B
• Average Insider Ownership: 6%
• Average CEO score on Glassdoor: 91%

28 stocks in the portfolio are rated 'BUY.'

5 ways to buy a stock that will make you rich

(Very Slowly). ⬇️ 1. Dollar Cost Averaging (DCA).

Automate your approach by investing the money you save every month.

My portfolio has tripled in the past 8 years.

There are 3 simple steps I follow.

Every month. Rain or shine.

Here is how I invest ⬇️ I focus on the business, not the stock.

I use my background from:

📈 Audit (PwC)
🎮 Corporate Finance (12 years in gaming)

Businesses in the app economy are my sweet spot:

✅ Asset light.
✅ Growing fast.
✅ Showing strong unit economics.
✅ Benefiting from secular tailwinds.

Warren Buffett is turning 92 today.

He is the most successful investor in the world.

Here are 92 timeless lessons from the "Oracle of Omaha:" 1. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

10 Investing Secrets

I Wish I Knew When I Started Have you ever heard of the hero's journey?

You can find this pattern in novels, movies, and TV shows, from Homer's Odyssey to George Lucas' Star Wars.

The main protagonist:

🛣️ Goes on an adventure
😓 Faces trials and errors
🌟 Wins a decisive crisis
🏡 Returns home transformed

Fortune's Future 50 was just updated.

Every year, Fortune teams up with BCG to provide a list of companies with the strongest long-term growth potential.

They identify 50 global companies best positioned to deliver above-average gains to investors.

Let's look at the list ⬇️ Fortune's Future 50 for 2021:

1/3

#1 $CRWD
#2 $TWLO
#3 $DDOG
#4 $SQ
#5 $ABNB
#6 $MRNA
#7 $JDHIF
#8 $DOCU
#9 $MELI
#10 Beijing Kingsoft Office Software

How To Invest In A Down Market.

With the market falling alongside a large rotation out of high-multiple stocks, it's time to revisit this list.

🧵⬇️ 1/ 2/ The Nasdaq $QQQ is not even in correction territory yet. But cloud stocks are being hammered.

The graph below shows $CLOU and $WCLD down 17% and 22% from their previous highs, respectively.

5 Ways To Prepare For The Next Stock Market Crash.

With so much talk about the next stock market crash being upon us, it's time to revisit this list.

🧵⬇️ 1) Ask yourself how much drawdown you can cope with.

To enjoy the benefit ~10% annually from 1926 to 2020, equity investors had to cope with both good and bad years.

Here is the historical frequency of pullbacks identified since 1928: