Duan Yongping: Want a 10x return? What information should you look for in financial statements? 01. I mainly use financial statements to eliminate companies. In other words, if I don't like or understand a financial statement after reading it, I won't read it. I think the most important thing about financial statements is to eliminate companies you don't want to invest in. 02. Look at what you care about or what you're worried about. 03. Being able to read financial statements is still very important. Although it's rare to make an investment decision just by reading a financial statement, it's still the first step in understanding a company. 04. If you feel you can't understand a company's financial statements, it's best to avoid it. If you can't understand the financial statements of any company, it's best not to invest at all, otherwise you'll definitely lose money in the long run. 05. In financial statements, I pay attention to these numbers: liabilities, net cash, cash flow, reasonableness of expenses, true profit, and net assets excluding goodwill. That seems to be it. 06. Only looking at financial statements will only show you a company's history. I care about what's composed of profit and cost figures; you need to know what they truly reflect. Furthermore, you need to analyze data over several quarters or even years. If you track a company for a long time, you'll know whether it's lying or telling the truth. 07. Many companies report high profits, but their cash flow is consistently decreasing; this is dangerous. 08. Don't care whether others are satisfied with a company. True investors are absolutely "oblivious to others," focusing solely on the company itself. They don't care if others are buying; they hope no one is buying. 09. My filters include business model and corporate culture; if they don't pass, I generally won't see them. 10. If you truly understand the "discounted future cash flow" mindset, you'll naturally understand the "value trap." 11. Actually, no one knows how long the market should take to reflect a company's value. Sometimes it's quick, sometimes it's slow. It's indeed rare for undervalued stocks to not rise for 3-5 years, especially after a bull market, but this doesn't mean undervalued stocks will definitely rise. There's another possibility called a value trap, where the stock appears valuable on paper but actually has a lot of inflated value. This kind of stagnation is easier to understand. 12. Unprofitable net assets are sometimes a burden. For example, building a hotel in a desolate place cost 100 million, but now it loses 5 million annually. The replacement cost is still 100 million, but it's now worth 50 million. Who would want it? 13. Calculating value only relates to the discounted present value of total future cash flows. In fact, net assets are only one factor in generating future cash flows, hence the term "effective net assets." That is, net assets that cannot generate cash flow have no value (and sometimes even negative value). The purpose of this term is to avoid being misled by the superficial numbers of "net assets." "Effective net assets" actually refers to the company's true profitability. 14. Be very careful with companies whose market capitalization is lower than their cash reserves—just as careful as investing in any other company! Companies whose market capitalization appears lower than their cash reserves are often worth looking at, but in most cases, this is not necessarily a bargain. 15. Unless experiencing a massive increase in sales volume, a good company should be defined as one that can generate a large amount of cash. 16. Why do some companies like to use debt? —The advantage of debt is that it allows for faster growth. The advantage of not having debt is that you can survive longer. Besides, banks generally only lend money if they've confirmed you don't need it. 17. My concern about most companies is that many take on debt to grow faster, only to run into trouble one day because of it. I generally prefer companies that focus on good products and don't set high revenue targets, like Apple. 18. I generally don't buy companies with high debt. 19. For unprofitable businesses, revenue is useless. 20. In the long run, businesses without positive cash flow cannot be profitable. Businesses without profit are obviously unsustainable. 21. Depreciation and amortization are cash flows that cannot be counted as profit (or included in costs) (if the company has cash flow). 22. If a company has a large revenue but only 1-2% cash flow, and this situation isn't temporary, then the company is in danger. Conversely, for companies without debt, short-term cash flow doesn't pose a threat to their safety. 23. How can you tell if a company is falsifying data? —What's fake can't become real; time will tell. There seems to be no formula, otherwise no one could fake it. However, understanding the product, market, competitors, and being familiar with financial statements can help you spot potential fraud. 24. Can net profit in a financial statement be considered net cash flow? —No. But generally, if net profit is greater than cash flow, you should be more careful and carefully examine what the profit actually represents (of course, you should check this regularly). 25. If cash flow is less than profit, be careful. Examine where the money is spent and whether it truly benefits future development; otherwise, it will disappear. Long-term cash flow being less than profit is not a good sign; carefully examine the financial statements. Cash flow exceeding profit is often due to depreciation or prepaid revenue, etc. Whatever the reason, it's best to understand it. 26. Many companies appear to be making a lot of money, but their cash flow is constantly decreasing. That's dangerous. 27. Future cash flow means the increase in cash after deducting reinvestment. In the long run, future cash flow is the most telling indicator. 28. What kind of capital expenditure is considered reasonable? —Any rational expenditure can be considered reasonable. Spending money under pressure from shareholders or the pressure of "growth" is risky. 29. Industries with high capital expenditures are less likely to produce good companies. 30. Our past experience shows that managers of a high-cost structure will always find reasons to increase company expenses; conversely, managers of a low-cost structure will always find ways to save on company expenses, even when the latter's costs are already far lower than the former's. (Warren Buffett) ———————— Noise-Free, Peaceful Dollar-Cost Investing Day 406 Currently holding 50 ETH, cost $2373.67 Currently holding 5.55 BTC, cost $86040 Currently holding 1822.32 SOL, cost $157.1 Currently holding 7300 LINK, cost $14.8 Today's actions: Continued mindless buying of 0.04 BTC, 5 SOL, and 50 LINK Current overall account profit: -14.38%