Accounting Is The Language Of Investing

The book "Quality Of Earnings" will you teach you about accounting red flags

Here are 7 red flags to watch out for on an earnings report: 1. Revenue can lie

A company's revenue growth might look great until you dig deeper

Take Under Armour in the mid-2010s.

They loaded up distributors with excess inventory to inflate sales (a tactic called channel surfing)

Eventually, sales fell off, and the stock tanked

How to analyze a:

-Cash Flow Statement
-Balance Sheet
-Income Statement

In less than 3 minutes: Accounting is the language of investing.

Understanding how each of these 3 financial statements are connected is crucial for seeking stock investment opportunities

Investing is the best way to become a millionaire

Here is how I would start investing with just $1,000: 1. Open up a brokerage account

I personally would use either Charles Schwab or Public

Once you do this, you should AUTOMATE monthly deposits into your account.

Accounting is the language of investing

But most investors overlook accounting red flags

Here are 7 red flags to watch for on an income statement: 1. Declining revenues

Shrinking revenue over time signals a company is losing its edge.

Example: Bed Bath & Beyond

Revenue steadily declined for years as competitors like Amazon captured market share. Weak sales eroded profitability, leading to bankruptcy in 2023.

Accounting is the language of investing

But most investors overlook accounting red flags

Here are 7 red flags to watch on a balance sheet: 1. High Debt Levels

A company with too much debt might struggle during economic downturns

J.C. Penny loaded up on debt to reinvent itself, but declining sales and mounting interest payments pushed the retailer into bankruptcy

I have read every single one of Warren Buffett's Annual Shareholder Letters

You'll learn more from these than from an MBA

Here are my top takeaways: 1. Invest in "inevitable" companies

Buffett often seeks businesses with products so essential they'd be hard to disrupt.

Think Coca-Cola

Despite global competitors, Coca-Cola's brand and distribution make it nearly unshakeable

Look for companies with a Moat

Most people don't understand why Warren Buffett keeps buying Sirius XM and Occidental Petroleum

But most investors don't understand the dividends received deduction (DRD)

Here's why Berkshire keeps buying: 1/ The DRD lets companies deduct a portion of the dividends they receive from other companies, which reduces the taxable income and results in significant tax savings

However, the size of that deduction depends on how much ownership they have in the company paying dividends

If you want to become a better investor (in 6 months), read these books: The Warren Buffett Way by Robert Hagstrom

Investing is the best way to become a millionaire

Here is how I would start investing with just $1,000: 1. Open up a brokerage account

I personally would use either Charles Schwab or Public

Once you do this, you should AUTOMATE monthly deposits into your account.

7 podcasts that will make you a better investor:

1. The Investing For Beginners Podcast 2. We Study Billionaires

Most people invest in stocks, ETFs, and crypto

But there’s one asset class where institutional investors make up around 80% of the market.

Now, with just $1,000, you can access the same asset institutions are investing in: 1. Which asset class have retail investors yet to fully explore?

Corporate bonds.

They typically offer stability and steady income, often overlooked by everyday investors.

Global stock markets are in turmoil, but why?

One major factor is the unwinding of the Yen carry trade

I'll explain it in less than 2 minutes: 1/ The Bank of Japan raised interest rates to around 0.25% which ended their long-standing policy of near-zero interest rates

But you might be wondering, why does this matter?

I'm an investor.

I use ChatGPT daily.

Here's how ChatGPT can help you make more money in the stock market: 1. Helps you understand a company

Warren Buffett says you should never invest in a company you do not understand.

"Explain Apple's business model to me like I am a 5th grader. "

Most people want to be an investor

But most investors don't understand macroeconomic indicators

Here's the basics of macroeconomic indicators: 1/ Gross Domestic Product (GDP)

GDP measures a country’s economic output.

When GDP grows, it signals a healthy economy, often leading to bullish markets.

On the other hand, declining GDP can indicate a recession, potentially triggering market downturns.

Investing is the best way to become a millionaire

Here is how I would start investing with just $1,000: 1. Open up a brokerage account

I personally would use either Charles Schwab or Public

Once you do this, you should AUTOMATE monthly deposits into your account.

The 10 best FREE investing resources on the internet: 1. @FINVIZ_com

A powerful stock screener that is simple to use. They offer quick data on market moves as well

I'm an investor.

I use ChatGPT daily.

Here's how ChatGPT can help you make more money in the stock market: 1. Helps you understand a company

Warren Buffett says you should never invest in a company you do not understand.

"Explain Apple's business model to me like I am a 5th grader. "

Most people want to be an investor

But most investors don't know how to read a balance sheet

Here's how to read a balance sheet: 1/ The purpose of the balance sheet is to show much a company is worth at that point of time.

It shows:
-Assets
-Liabilities
-Shareholder Equity

Companies share their balance sheet in their 10-Q and 10-K

Joel Greenblatt is one of the greatest investors ever.

He compounded at 49% for 20 years. 🤯

Here are 7 investing tips from his Columbia Business School lectures: 1. Overestimating

If a company has a low valuation, this doesn't mean that it is a bargain.

The company could be on an irreversible downward trend.

Don't buy something just because the stock is down.

Most people want to be an investor

But most investors don’t know how to read a cash flow statement

Here’s how to read a cash flow statement: The Cash Flow Statement shows how cash moves in and out of a company.

The cash flow statement is presented in the quarterly and annual company filings

12 charts every investor should know:

1. The Psychology of a Market Cycle 2. There will always be a smart sounding reason to sell in the short term, but you will regret it in the long term: