Annual Report Reading

[robertbanking]

Hello you very intelligent and very amazing people that make up this forum. I truly hope that your week is going well.

I was reading an article yesterday that said Warren Buffett can read Annual Reports in around 60 minutes, which is fascinating. I know the American Airlines Annual Report is around 264 pages long. Can i kindly please ask if there is certain sections that are more important to focus on that will give you a better understanding of the business as it seems alot of information and i know not all the contents of the Annual Report will be relevant?

For instance can you possibly skip sections or whether certain areas are more important to get an understanding of the business, such as the Management discussion, Financials and Executive Compensation etc please? If anyone kindly had any thoughts on this i would be forever grateful and thankful for your support with this please.

Sending you lots of good wishes and i truly hope your investments are doing well. All the very best.

[stacker512]

Specifically that I saw some Warren Buffett (old) videos recently about this, is what's spurred me on to start reading Annual Reports, where previously I've been too lazy to read them.

I'd think that someone with so many decades of experience, Warren Buffett likely has an idea of what bits to skip, and what to focus more on.

The Annual Reports that I have pending to read (gulp!) are GSF, BRSA, NAIT, FEV, HNE, and JEGI, and these seem to range from 82 pages to 142 pages. And a lot contain pictures too, so it's no inconceivable that such shorter Annual Reports could be read in a surprisingly short time for an experienced investor. Granted, these are Investment Trusts, and maybe direct company shares have considerably longer reports, such as your American Airlines example.

My feeling, thinking about this as a beginner in reading these reports, is that after a few years of reading reports from the exact same investment, you'd soon get a sense of which bits you can skip, and which bits to read very carefully. I suppose it comes down to experience and practice. There are probably bits you could skip if you really wanted to.

I'm going to try to make it a habit to read all of the reports carefully for a couple of years at least. It's up to you if you wanted to or not.

[jaizan]

For instance can you possibly skip sections or whether certain areas are more important to get an understanding of the business

I've never seen anything worth reading in the ESG section. It's a waste of paper, or a waste of server space.

I also think it's safe to ignore everything in the remuneration section, except of course, details of the directors salary, bonus, share options etc. Either they are overpaid or not. How they claim to have decided on the remuneration is irrelevant. It is the result that counts.

[Dod101]

For instance can you possibly skip sections or whether certain areas are more important to get an understanding of the business

I've never seen anything worth reading in the ESG section. It's a waste of paper, or a waste of server space.

I also think it's safe to ignore everything in the remuneration section, except of course, details of the directors salary, bonus, share options etc. Either they are overpaid or not. How they claim to have decided on the remuneration is irrelevant. It is the result that counts.

I read quite a few Annual Reports and agree that the ESG section can be safely ignored. I tend to concentrate on the Chairman’s comments and those of the CEO and CFO. I do not read the accounts except to check on the difference between the statutory accounts and the so called underlying figures. I am not checking any financial ratios or much financially actually. I am trying to get a flavour of whether I can trust what is printed. Is it in plain English? Are there lots of fancy photos? Do they sound as if they are waffling? I find the Diageo report for instance, very clear, no extraneous stuff and direct in what it is saying. That is what I look for.

Buffett probably dissects the accounts but I do not do that. If everything else adds up then the Directors can be trusted to get the accounting side right. Mind you, you ought to be able to dissect the accounts as well or at least understand how they are built up.

Best to do this for two or three years to get the flavour of a company.

Dod

[OhNoNotimAgain]

Hello you very intelligent and very amazing people that make up this forum. I truly hope that your week is going well.

I was reading an article yesterday that said Warren Buffett can read Annual Reports in around 60 minutes, which is fascinating. I know the American Airlines Annual Report is around 264 pages long. Can i kindly please ask if there is certain sections that are more important to focus on that will give you a better understanding of the business as it seems alot of information and i know not all the contents of the Annual Report will be relevant?

For instance can you possibly skip sections or whether certain areas are more important to get an understanding of the business, such as the Management discussion, Financials and Executive Compensation etc please? If anyone kindly had any thoughts on this i would be forever grateful and thankful for your support with this please.

Sending you lots of good wishes and i truly hope your investments are doing well. All the very best.

Just go straight to the cash flow, then have a look at segmental breakdown by revenue, profit and capital if it is provided.

If you can be bothered have a look at how many new shares might be exercised via executive share options. In "high growth" companies this can be very dilutive. Then see how much cash it spent on share buy-backs to minimise that effect. It is just a merry-go-round for giving execs more money.