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What reading annual reports tells?

He likes to know as much as he can about the person running the business. How they think about the business? What is really going on inside the business?

The perfect annual report would be… a report that was identical to his partner telling him the state of the business if he was away from the company for a year. 

There needs to be an intent behind an annual report. If it is just a sales document he is less interested.

The difference between annual reports and Wall Street reports?
Over the years he has found reading a lot of annual reports to be quite useful for making business decisions at Berkshire. . .

It is amazing how well you can do in investing with outside information [information available to everyone]. In my view you can’t read Wall Street reports and get anything out of them —you have to do it yourself. I don’t think we have ever gotten an idea in 40 years from a Wall Street report. But we have gotten a lot of ideas from annual reports.

The time required? It will be 45 minutes to an hour for each report. If there are 6 to 8 companies in the industry that is 6 to 8 hours. The way you learn about businesses is by absorbing information about them. Thinking about them. Figuring out what counts and what doesn’t. Relating one thing to another. That is the job. You can’t get that by looking at a bunch of little numbers on a chart or reading market commentary. That just won’t do it. You have to understand the businesses. That is where it all begins and ends.


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