Oh dear! Warren Buffett says that people should only invest in companies that understand

When I was looking at the Barclays (LSE: BARC) Results last week, I remembered the words of Warren Buffett, who once said: “Never invest in a business that cannot understand. “

As a shareholder at the bank, I was interested in its results of 2024, which were published on February 12. In particular, I was reviewing the extensive annual report of 536 pages of the company.

What is inside?

It is an impressive document. It contains 226,195 words, yes, I checked it! Based on an average reading speed of 238 words per minute, I would take almost 16 hours to read everything. But this does not leave time for breaks. And it would take me much longer to understand everything.

I am an accountant, so it is the numbers that interest me the most. However, the financial statements do not begin until page 423. Before that, it is necessary to travel all kinds of information, including a commercial review report, climate and sustainability, and a section on corporate governance.

The risk is clearly a big problem for the bank. The word, and its derivatives, appears 3,846 times. In fact, risk review extends to 134 amazing pages. Reading the possible challenges, I am surprised that the bank directors want to leave the bed in the morning.

And then there is the bit in the weather. Do not be misunderstood, we all need to play our role in saving the planet. But in the course of 78 pages, Barclays enters a lot of details. Do I really need to know that £ 42 billion have been provided to properties with a qualification of DA energy performance certificate?

Backing down

Warren Buffett states that investors do not have to be particularly brilliant to earn money. He acknowledges that an IQ of 130 will serve. Unfortunately, mine is not high enough to deal with this information overload.

But there is danger of complicating things too much.

I admit that I don't understand “franchise risk“Or Basel 3.1 standards.

But I know that Barclays earns their money by encouraging customers to deposit their savings, and then lend this cash to others at a much higher interest rate. Simple. I do not need to read the 536 pages of the Bank's Annual Report to understand this.

And impressively, despite the fact that interest rates began to fall, managed to increase their net of net interest, in 2024, to 3.29% (2023: 3.13%).

I know that banks can be volatile. And there is no guarantees that Barclays meets its objectives.

But I own the bank's actions because, when I first investigated, I thought they offered a good value. In addition, their growth prospects seemed promising. Today, my point of view has not changed. Based on their profits from 2024 per action of 36p, the shares are quoted in a historical price / profits of 8.3. This is under the Ftse 100 average.

Encouragingly, its 2024 results exceeded expectations and the bank plans to increase its performance on tangible capital significantly in the next two years.

For these reasons, I think it is an action that investors could consider.

But I think the time for a receiver comes. The oldest annual report I can find for the bank is 1990: it extends to only 68 pages. If the chancellor takes seriously the economy of the United Kingdom that grows again, should perhaps allow companies to concentrate on increasing their profits, instead of their annual reports?