tailieunhanh - HOW TO THINK LIKE BENJAMIN GRAHAM AND INVEST LIKE WARREN BUFFETT PART 5

Investments cannot be made on the basis of such temporary gardens either but require a look at the history of business. If accounting is the language of business, numbers are its history. | C HARTER 8 RECOGNIZING SUCCESS What makes an investment attractive A price substantially lower than value. Estimating value requires making judgments about probable future performance but the only available basis for prognosis is the record of the past. The historian Daniel Boorstein likened planning for the future without knowing some history to planting cut flowers. Investments cannot be made on the basis of such temporary gardens either but require a look at the history of business. If accounting is the language of business numbers are its history. Just as history is complex broad and replete with contradictions so too are the numbers of business history. If you focus on a few key numbers however the road map to good investment selection becomes clear. Start with the management s discussion and analysis of the business. In addition to a narrative assessment of the business this summarizes the most important numbers in the company s financial statements. So you don t have to go to the trouble of doing the calculations just look them up. This discussion also interprets the meaning of those numbers from management s perspective. So you also don t have to become an expert in accounting to make sense of this stuff. Beware of using secondhand databases. Lots of Web sites give you a chance to employ screening tools to search through 12 000 or more different businesses with dozens of different variables of the kind described below. These tools operate as filters to give you a limited number of businesses to examine more closely. In principle this is precisely the kind of technique that is sensible to use. However you cannot be sure the search engines are working with data of integrity. The data do not usually include information about a company s accounting policies footnote information or management s discussion and analysis. The data are not always up- 119 Copyright 2001 The McGraw-Hill Companies Inc. Click Here for Terms of Use 120 Show Me the MoNEy dated or .