How to Analyze a Balance Sheet Like a Hedge Fund Analyst

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  • Опубліковано 8 січ 2025

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  • @InvestorCenter
    @InvestorCenter  3 роки тому +10

    I just uploaded the spreadsheets I used in this video to my Patreon. My Patreon is where I will be uploading all of my analysis tools and spreadsheets. Check it out here: www.patreon.com/user?u=38414104

  • @Longtack55
    @Longtack55 Рік тому +2

    AAPL holder here, and thanks for the refresher. I'll make some comparisons for the last few years.

  • @genius_idiot7618
    @genius_idiot7618 3 роки тому +18

    Thanks. Came across your videos over the weekend and was curious if there would be a BS video soon. Great content. Keep up the good work. These videos are extremely important us little investors.

    • @InvestorCenter
      @InvestorCenter  3 роки тому +5

      You may be a “little” investor now, but I’m trying to make you a big time investor!!!

  • @yomi001
    @yomi001 3 роки тому +40

    Great explanations! I love that you use real-world examples to help us understand the concepts.

    • @InvestorCenter
      @InvestorCenter  3 роки тому +4

      Thank you! Glad you found the video helpful!

  • @singhmaster4
    @singhmaster4 2 роки тому +1

    That was good. I couldn't wrap my head around some of it because of the terminology but if I brush up on it I will understand it 100%. I will save this video in my list. Thanks!

    • @InvestorCenter
      @InvestorCenter  2 роки тому +2

      Glad you enjoyed the video! Watching it a few times and you will learn more each time

    • @singhmaster4
      @singhmaster4 2 роки тому

      @@InvestorCenter Is there a video you can refer to where I can learn this in depth? Should I look for videos focused on accounting?
      I have also subscribed to your channel.

  • @yeswecan4312
    @yeswecan4312 2 роки тому +4

    I would be very interested if you could do a benchmark analysis. What is a “good” ROE in different industries, What’s a good net margin? What’s a good, gross margin, etc.

    • @ethanstraight3331
      @ethanstraight3331 2 роки тому +3

      I would recommend doing this yourself for practice. Fairly simply math here and also good practice looking at different firms balance sheets.

  • @FutbolHeritage
    @FutbolHeritage 2 роки тому +2

    You are really teaching people true investing and not just ‘good to ear’ statements

  • @ponzianomanning3071
    @ponzianomanning3071 2 роки тому +1

    Fantastic explanation! I can't Waite to watch Income statement.

  • @manylch7964
    @manylch7964 10 місяців тому

    Excellent clear and concise explanation ... bravo

  • @dbsk06
    @dbsk06 Рік тому

    11:43 is this a large net debt figure or not (compare with EBITDA, proxy for CFO) and look at peers in same industry

  • @BBFletcher4202
    @BBFletcher4202 2 роки тому

    Can listen to you all day. Thanks again. 🙌🏾

  • @Redeemed_marine_69
    @Redeemed_marine_69 6 місяців тому

    Thank you so much for the videos! All this stuff finally makes sense to me now! I’ve always been daunted at everything i start out in so that’s not saying much but really thank you for showing me this isn’t rocket science. Actually looks like it could be pretty fun 😄

  • @amitparikh8340
    @amitparikh8340 2 роки тому +2

    Excellent resource. TY.

  • @focusrelax8838
    @focusrelax8838 2 роки тому +2

    Really good, I like what you considered most important to look at the balance sheet and the ROE and also ROC. This kind of metrics on what’s worth looking at, what’s the most important and how to calculate and also if the higher the better or the lower the better it’s really good info you share for those who are self learning 🙏

    • @focusrelax8838
      @focusrelax8838 2 роки тому

      Peter lynch had something about it should be 70% at least , I think he talked about debt to equity that equity should at least be 70% higher than debt to consider it good, I think it was in his book beating the street, I need to reread it .

  • @simon6932
    @simon6932 9 днів тому

    Very informative! Can you recommend a website that provides the balance sheet information used in this video in a simple and easy to digest way?

  • @GustavoSN
    @GustavoSN Рік тому

    9:49 Why do you ignore accounts payable and other current and non current liabilities when calculating the "true debt" of the company?

  • @MuhammadRafiuddin9
    @MuhammadRafiuddin9 Рік тому

    Your are the symbol of perception
    Too good 👍

  • @garrettwilliams6908
    @garrettwilliams6908 2 роки тому +2

    Nice video. A bit of an add-on, I do feel ROA is generally a better path to analyzing a firm's profitability over ROE, as it shows how efficient today's assets are at generating returns and avoids the potential manipulation of a firm buying back shares to improve ROE

  • @giannismns
    @giannismns Рік тому

    Incredible job. Just a question on 5:17. By true cash you mean free cash flow ?

  • @bhs08002
    @bhs08002 Рік тому

    Instant subscribe. Great video!

  • @fresh2def973
    @fresh2def973 3 роки тому +5

    Awesome educational content. You're killing it.

  • @MoneyMathai
    @MoneyMathai 5 місяців тому

    Thank you so much for this. Really helpful

  • @Txyleo
    @Txyleo 2 роки тому +1

    Excellent work 👍

  • @Dylanwindellor766
    @Dylanwindellor766 2 роки тому +1

    Thank you for explained as an easily to understand for starting to investment in stock market it makes me to realize about before investing that you need to know about basically in stock. 👍

  • @sigmadaddy106
    @sigmadaddy106 3 роки тому +3

    Hi, great video and great channel!
    12:04 Why do you use EBITDA to calculate whether it's possible to support the debt?
    Is the influence of other CapEx and taxes not significant?
    What do you think about using FCF to estimate the possibility to take on additional debt in the future for leverage if the business supports it?
    Can we, with this logic, use FCF estimates along with cash and cash equivalents to estimate a margin of safety on the existing debt?
    Thanks in advance!

    • @InvestorCenter
      @InvestorCenter  3 роки тому +2

      Great question! The investment industry uses EBITDA but I personally think that EEBITDA minus Capex is a better metric to use and is a more conservative analysis.

    • @InvestorCenter
      @InvestorCenter  3 роки тому +1

      And just to follow up, the cash and cash equivalents is already factored into the denominator of the equation. The “net debt” number factors in cash the company has

    • @hodoprime
      @hodoprime 2 роки тому +1

      I would rather use EBIT. Interest can be restructured. Debt is paid before taxes(thus interest is prioritized over tax). DA gives you a good idea of capital requirements to keep a company afloat so that need to remain in the calculation. Capex can vastly exceed maintenance levels so I would not use capex or FCF.

  • @jbrochon9556
    @jbrochon9556 2 роки тому +1

    Thank you for the great content, I learned a lot. However, there is someting I don't understand. When I look at the Balance sheet for Apple using my bank web site some of the amounts match but have a totally different terminology. EX: Commercial Paper is called Notes payable / Short term debt". Why is there different terminology ? Another question I have is that some of the amounts you mention I just cant find them in the balance sheet. Do pltforms have different interpretations ?

  • @Sglingani
    @Sglingani 2 роки тому +1

    Fantastic video thanks for that

  • @kamaldas1338
    @kamaldas1338 2 роки тому +1

    Exciting explanation 👌!Keep up the good work 👍

  • @KP-uj1wf
    @KP-uj1wf 3 роки тому +1

    Thx once again for your wonderful videos… so clear and easy to understand!

    • @InvestorCenter
      @InvestorCenter  2 роки тому

      Glad you enjoyed the video 😊

    • @KP-uj1wf
      @KP-uj1wf 2 роки тому

      @@InvestorCenter I also went back and viewed your Cash Flow statement video. Another 10/10! I now use ‘Free Cash Flow Yield’ in my analysis. I find it very interesting when you compare companies in the same sector. It really shows which are the winners in that sector. Thx again!

  • @ryasaw519
    @ryasaw519 3 роки тому +1

    Thank you so much, I love your channel !

  • @AR-pd3zu
    @AR-pd3zu 2 роки тому

    Excellent video, thanks so much it was very instructive.

  • @thestudentofdhandho5302
    @thestudentofdhandho5302 2 роки тому +2

    Thanks for the insightful video. I recall Buffett & Munger decrying EBITDA as a suboptimal measure of genuine profitability as depreciation increases capex. What disadvantage do you see to using Net Debt to EBIT as an alternative?

    • @InvestorCenter
      @InvestorCenter  2 роки тому +3

      That is true. I personally think “owners earnings” is more relevant. This is a term that Buffett created. It is EBITDA - capital expenditures. It gives a more realistic view of a company’s ability to service debt while continuing to grow/maintain the businesses operations

    • @thestudentofdhandho5302
      @thestudentofdhandho5302 2 роки тому

      @@InvestorCenter oh that’s perfect. Thanks for the tip - I’ll add the net debt to owner’s earnings ratio to my analysis model

  • @kevinkant6817
    @kevinkant6817 3 роки тому +1

    Another great video, thanks 🙏

  • @leochen887
    @leochen887 2 роки тому

    FWIW, I slow the Playback speed from Normal to 0.75. This allows me to better absorb the material on my initial view of her video. And of course, I go back to her videos from time to time because I discover insights that I missed in the first iteration.
    So I guess that makes me a slow learner. But I'm okay with that. I'm a retired aerospace engineer who dedicated my career to the development of Advanced Combat Aircraft and our maintaining Air Superiority.
    Like a financial analyst, I also was trained to view Data as Being Everything and that Everything Is Data, with Balance Sheets being just one source of information/data. (Engineers do look at a vendor's balance sheet when we're trying to assess whether they are a risk.)

  • @jirehllc1793
    @jirehllc1793 2 роки тому

    THANK YOU!
    Are you available as a guest speaker for Groups on a zoom meeting?

  • @chrisa.9977
    @chrisa.9977 2 роки тому +1

    Where does common stock and preferred stock?

  • @carloslongo53
    @carloslongo53 11 місяців тому

    ROE can be inflated by debt, though. Wouldn't it be better to use ROIC instead? By the way, how do you calculate ROIC? I know there are multiple ways that investors use. Like EBIT - Taxes / Equity + total debt +total operating leases - marketable securities (invested capital). While others just do EBIT / Equity + Net debt (or -Net cash)

  • @darylallen2485
    @darylallen2485 Рік тому

    1:08 - I don't agree with this. If you take out a loan, its a liability, but the cash you have from the loan is also an asset. If assets and liabilities are opposites, why can they be represented as an asset and liability at the same time on a balance sheet?

  • @louiecutamora2388
    @louiecutamora2388 2 роки тому +1

    Hello investor center. Just wanna ask. Your computation for true debt is adding loans ( commercial and terms debts ). Can you please tell, what happen to accounts payable and other current liab. why this is not part of your true debt. please. Thanks

    • @InvestorCenter
      @InvestorCenter  2 роки тому

      Very good question! Because those are short term in nature. If I were to include accounts payable and other current liabilities, I would also have to include accounts receivable and other current assets.

  • @felipe741
    @felipe741 3 роки тому

    Amazing. More like this please 🙏🙏

  • @wunjo8586
    @wunjo8586 9 місяців тому

    Hi! Can you explain where I can find the Gross Property Plant & Equipment? thank you!

  • @parmarpreyash683
    @parmarpreyash683 2 роки тому

    Awesome like to watch more like that

  • @abasembatya
    @abasembatya Рік тому

    I think you can as well use a 5w led bulb???
    Thanks for the project

  • @KP-uj1wf
    @KP-uj1wf 2 роки тому

    Hi again. Are their any specific ratios you use to review and analyze REIT’s? Thx

  • @johnpatrick3458
    @johnpatrick3458 Рік тому

    You are great! Thank you!

  • @pfuiteufel1385
    @pfuiteufel1385 2 роки тому

    Thank you for your work and explanations, very much appreciate it. However, I don't understand why net-debt doesn't account for payables, liabilities and such. Isn't one being too generous with regards to a companies solvency that way? Thanks in advance.

  • @davidngo8229
    @davidngo8229 Рік тому

    Hi @InvestorCenter, I have a question about calculating the numbers. How come you only select certain numbers to calculate? Why not take the totals of each? Example, in Liabilities, you only choose Commercial Paper, Term Debt Current and Term Debt Non-Current. Why not take total current liabilities and total liabilities numbers?

    • @kk_3354
      @kk_3354 Рік тому

      Because those are the debts you are obligated to pay first, you could go default if you don’t pay

    • @gauravthadanii
      @gauravthadanii Рік тому

      @@kk_3354 also because those are the debts you pay with your cash others not necessarily

  • @jeremy3195
    @jeremy3195 2 роки тому

    I saw the shareholders' equity of some company are negative (e.g. MSCI), what does it mean? and why will it happen?

  • @prashanthkoundinya8385
    @prashanthkoundinya8385 3 роки тому

    Nice explanation, keep it coming

    • @InvestorCenter
      @InvestorCenter  3 роки тому

      Thanks! I’m looking forward to putting out more helpful videos for you guys!

  • @lauravolkman
    @lauravolkman 3 роки тому

    Great video as always!

    • @InvestorCenter
      @InvestorCenter  3 роки тому

      Thank you, Laura! Glad you enjoyed the video :)

  • @dbsk06
    @dbsk06 Рік тому

    Isn’t ROE based on book value not accurate if it differs from market value significantly ?

  • @rabiehmoussa9854
    @rabiehmoussa9854 2 роки тому

    Super cool channel ! Keep it up

  • @diamondgeezertunes
    @diamondgeezertunes 3 роки тому

    Excellent content ...

  • @rainmaker704
    @rainmaker704 3 роки тому

    Great vid!

  • @lazardjurovic2883
    @lazardjurovic2883 3 роки тому

    Great stuff. I have a question for you.
    What do you think about investment analyst job? Do you guys work long shifts? Is it a high-paid job?

    • @InvestorCenter
      @InvestorCenter  3 роки тому +1

      Compared to the standard 35-40 hour work week, it is long hours. However, not nearly as long of hours as compared to investment bankers. In terms of compensation, I can’t complain lol

  • @ameshshamike8906
    @ameshshamike8906 5 місяців тому

    Excellent explain

  • @Faloudelphia
    @Faloudelphia 2 роки тому

    Very well. I wish I could have lunch with the person who did this presentation.

  • @jimmyau56
    @jimmyau56 2 роки тому

    where do you look for balance sheets? on the companies website?

  • @kidze73
    @kidze73 2 роки тому

    hi, how do I calculate how much a company reinvests its profit?

  • @BSI_Inc.
    @BSI_Inc. 2 роки тому

    I'd like to ask something. What can count as true debts and true cash?

  • @monnombre6547
    @monnombre6547 2 роки тому

    thank you for this video!!!!!!

  • @mtoporovsky
    @mtoporovsky 11 місяців тому

    Masterworks is not stock...where u get info? For analyes?

  • @JackCasablanca-painter
    @JackCasablanca-painter 3 роки тому

    Thank you! Very helpful video. But where can we find a company's balance sheet? And cash flow statement and income statements too? Thanks!

    • @InvestorCenter
      @InvestorCenter  3 роки тому +1

      Google the company’s name and “annual report” and you will be able to find it on the company’s website

    • @JackCasablanca-painter
      @JackCasablanca-painter 3 роки тому

      @@InvestorCenter Hey, thanks so much! I didn't know it was public info.

  • @reeceshaw9717
    @reeceshaw9717 2 роки тому

    This is a great video even though I got baited with Warren Buffets face

  • @joseguerrero2221
    @joseguerrero2221 Рік тому

    Hi, can anyone please explain to me what "Book Value" means? I'm reading Benjamin Graham's book The Intelligent Investor and can't figure out what it means. I'm pretty sure I didn't skip anything. And the internet seems to give me different definitions as to what it means.

  • @cz7886
    @cz7886 3 роки тому

    Pure Gold!

  • @yakopro49
    @yakopro49 2 роки тому +1

    Warren Buffet your a Legend. If I were a marvel top executive, I would make you a heroic character in a video game or movie.

  • @LifeMasteryPodcastStevenArecco
    @LifeMasteryPodcastStevenArecco 2 роки тому

    @ 7min 45 sec. apples PP&E % of sales is 9.275% not 11% unless my math is wrong. Please verify?

  • @NotNoseBlind
    @NotNoseBlind 2 роки тому

    Oracle of Omaha he the truth - this video is a must watch

  • @AR-pd3zu
    @AR-pd3zu 2 роки тому

    someone can help me please, 7:40 sales: 365.817, Where does the sales result appear? because I did not see it on the balance sheet. (365.817).. thank so much if someone can help me with that.

  • @YAY11LLI
    @YAY11LLI 8 місяців тому

    Amazing!

  • @ralphtozier9682
    @ralphtozier9682 3 роки тому

    What do you do with good will? It seems like it should not ever be on a balance sheet since it is such a wild guess.

    • @InvestorCenter
      @InvestorCenter  3 роки тому

      You are right. Personally, I ignore goodwill

    • @georgeturner6244
      @georgeturner6244 Рік тому

      Reduce shown equity by goodwill is a useful approach to me.

  • @Gitohandro
    @Gitohandro 3 роки тому

    Do you offer consultations?

  • @IknowIamafool
    @IknowIamafool 5 місяців тому

    Thanks so much.

  • @giuseppesiragusass
    @giuseppesiragusass 2 роки тому

    Why do we use net debt/ebitda and not debt/earnings?

    • @InvestorCenter
      @InvestorCenter  2 роки тому +1

      Good question. This is because earnings can be distorted due to accounting. While EBITDA is a more close approximation of a company's cash it generates to be able to pay its debt

  • @Korocoran
    @Korocoran 3 роки тому

    Excellent !

  • @airepublic9864
    @airepublic9864 2 роки тому

    Can it be programmed?

  • @hedwegg
    @hedwegg 2 роки тому +1

    Stocks! Balance Sheet!

  • @anhnguyenhong8770
    @anhnguyenhong8770 Рік тому

    You need to study into Balance Sheet like Mr. Buffett.

  • @financialwisdom432
    @financialwisdom432 3 роки тому

    this is heavy stuff. I have to watch this probably like 3 times

  • @williamdavis9943
    @williamdavis9943 2 роки тому

    He doesn't give this advice for free you can believe that. Even when he is not out to make money he is making money.

  • @zhyarjalal4179
    @zhyarjalal4179 Рік тому

    can i pay a professional financial analyst to analyze the whole company statements for me?

  • @vasanthakumarnagaraj308
    @vasanthakumarnagaraj308 3 роки тому

    You awesome 🙂...

  • @dbsk06
    @dbsk06 Рік тому

    4:59 true cash

  • @candyfloss184
    @candyfloss184 3 роки тому

    Thank you

    • @InvestorCenter
      @InvestorCenter  3 роки тому +1

      Thank you! Long time not seeing a comment from you, friend!

  • @T_m_m170
    @T_m_m170 2 роки тому

    I follow the American coordinator. I think someone in America will brake on if anyone goes too far.

  • @mustafaalwan6523
    @mustafaalwan6523 3 роки тому

    Apple has much higher ROE because the huge amount of intangiblity i.e brand name and customer loyalty . You take that of the equation and you can calculate the buffet's return which how much capital is able to generate without intangible asset . Furthermore you can deduce that how much the intangiblity is an important factor in the case of apple of KO.

    • @gauravthadanii
      @gauravthadanii Рік тому

      hey can you explain in more detail, cause i am a little confused. how does intangible assets affect this?

  • @joncarr1200
    @joncarr1200 3 роки тому

    This is what they will never teach us in school. At least, not unless you take a specific class.

    • @InvestorCenter
      @InvestorCenter  3 роки тому

      Thank you, Jon! I’m glad I can be helpful:)

  • @bigthing3984
    @bigthing3984 2 роки тому

    Everything is good but if you could explain it at a slower pace, people could understand better having some space to think for few seconds.

  • @wesleyg2403
    @wesleyg2403 3 роки тому

    Fun fact: in dutch balance sheets, the least liquid asset is on top and the most liquid asset is on the bottom. Same for the passiva side (forgot the name for the other side of the balance sheet in english).

  • @WPaKFamily
    @WPaKFamily 2 роки тому +1

    That was a huge blunder at the end comparing Apple and Samsung's ROE. Apple is loaded way more on debt (leveraged) than Samsung is. If Apple had at most a Debt/Equity Ratio of 1, their ROE would be about 60% or less (which is still a lot). However, it's not as simple as saying just adjust their D/E ratio. Their earnings since 2017 to ttm has been supported by lots of debt. So, really the ROE for Apple would be only a little more than Samsung's.

    • @gauravthadanii
      @gauravthadanii Рік тому +1

      yeah, I think I get your point. a better metric would be ROIC to measure the growth. which factors in both, debt and equity.

    • @WPaKFamily
      @WPaKFamily Рік тому

      @@gauravthadanii yep

  • @carlosnava2349
    @carlosnava2349 2 роки тому

    Good

  • @businessmindedwolf730
    @businessmindedwolf730 3 роки тому

    Great

  • @NoW_Is_TimE
    @NoW_Is_TimE Рік тому

    5:00 you mean MIllions

  • @owengoerk9171
    @owengoerk9171 4 місяці тому

    Didn't Munger call EBITDA bullshit earnings?

  • @andrey4970
    @andrey4970 2 роки тому

    Appreciate

  • @torhikekhoudoian2979
    @torhikekhoudoian2979 День тому

    THX

  • @TheWorkingClassroom
    @TheWorkingClassroom 2 роки тому

    EBITDA is not a good proxy for cash flow. Please don't tell people that it is.

  • @wuziwu8148
    @wuziwu8148 Рік тому +10

    I thought I was supposed to learn how to analyze a balance sheet like a hedge fund manager? Okay.. Then why are we going back to ABC's of investing with what an asset and liability are.....? Not even 2 minutes into the video and I can't take the title seriously.

  • @SkankHuntForty2
    @SkankHuntForty2 Рік тому

    Hey, BABA's balance sheet looked really good, didn't it? It definitely fooled Charlie Munger. Thanks again for the shit call on BABA, Charlie.