Reading 10-Ks

[Guest longinvestor]

This thing about Guru shadowing..a bit of wisdom from the land where the word Gu-ru originated. Closest english meaning is "showing the light(knowledge)" or one who does so. All of the arts, vocations known to man were passed on generation to generation and this had been the only way of gaining knowledge. Called Guru-Shishya tradition.

 

Well until the print media and now faster media came about. We don't often know what he have learned and how knowledge (not information) is gained. There is lots of information out there.

 

Whether they picked the Guru or the Guru picked them, the greatest students of the old tradition all realized that a lifetime was not enough to learn from one Guru.

 

I try hard to not be a busybody.

[netnet]

Thanks again, everyone.  To be clear, my number one goal at this stage in my life is to learn the trade of analyzing businesses and securities.  My instinct is that a thorough approach is what I need, but I do want to be as efficient as possible (time is scarce).  It would probably be more valuable for me to spend my time analyzing an something that I don't invest in and learning a ton than finding something that is a potential investment and but not learning anything new.  Finding somewhere to put my money is just icing on the cake right now.

 

Well I concur with most of what has already been said.  With the following caveats:

 

• Remember as I think you are hinting at, the point is building your circle of competence.  So start with an industry you know and understand it thoroughly.  Read the trades, the AR's, 10q's, 10k's and related filings of the company, its competitors, suppliers and customers

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• Figure out what structure of the industry is (viz. Michael Porter)
  
• Of course, you have to understand the rules of accounting, particularly as they relate to the industry in question.
  
• Find another industry, repeat
  

 

One of the points of all this is to develop a feel for the industry and the history of the particular company and the management.  Now remember that even this thorough approach has a draw back other than the time issue--suppose you pick a bad industry in which to invest.  To be a buggy whip analyst or internet isp investor is not going to make you any money.  Don't fall in love or (in hate with an industry, see the railroads 10 years ago.  You need to stay flexible.) So you have to remember that you are still looking for 10 one foot hurdles not one 10 foot hurdle!  Munger and Buffett hated railroads for years, but things changed.

 

The flip side of the above is that reading the 10k's of a company in an industry you do not understand is not that productive, until you know the industry and the business.  (Now, none of this really applies directly to special situation investing--arbitrage, bankruptcy, spinoffs, these have their own dynamics and you still need to try to get informational advantage etc.)