Best Books to Help Your Investing Skills

Hello all, this was my first post (mod just now added to frontpage) so go easy on me. And full disclosure, none of these books is a silver bullet, just a good arrow to have in your quiver. If you're investing others' money, there's no substitute for prudence, good judgment, and wisdom, no matter what school (bottom up, top down, value, growth, momentum, etc.) you follow.

Since this thread (2014 book list) didn't get much attention, I wanted to post my thoughts and see what the other monkeys had to say. My list will be very biased towards value investing (if you don't know what this is, google it), since that's the philosophy I use when I manage client portfolios. I've read all of these at various ages and some I've read more than once, but I'd recommend each and every one of them to anyone looking to either get into the investment management business or just looking to improve his intellect. Here it goes, in order of importance:

1. Security Analysis by Ben Graham. 2nd or 6th edition only – this book is very jargon heavy so will make more sense to those already in the industry, but many of its lessons still hold true today

2. Intelligent Investor by Ben Graham, skip Jason Zweig's commentary – same as above, if I were a high school principal I would make this required reading before graduation, it’s that important.

3. 7 Habits of Highly Effective People by Stephen Covey, great book on life, I can assure you this has helped my investing acumen. If you haven’t read this, you should.

4. The Most Important Thing by Howard Marks – newer book, but an instant classic. Compiled memos from Oaktree’s Howard Marks, one of the smartest men to manage money that I’ve read

5. Contrarian Investing Strategies by David Dreman – Dreman is an odd character, but he has a very objective approach to prove why cheap valuation strategies tend to outperform over time. Not a particularly enlightening book, but a great series nonetheless.

6. Margin of Safety by Seth Klarman – I know, I know, it costs several grand on Amazon. If you do some sleuthing, you might be able to find a pdf.

Others worth mention:

The Rational Optimist by Matt Ridley
Fortune’s Formula by William Poundstone
Any of the wiley “little books,” but especially the ones by Chris Browne, Joel Greenblatt, and John Mauldin
Anything written about Warren Buffett (start w/The interpretation of financial statements)
Common Stocks & Uncommon Profits by Phil Fisher
Financial Independence Through Common Stocks by Robert Merritt

What do you all read? I think it’s important to get away from WSJ and Bloomberg every once in a while and bury yourself in a book. It makes you more interesting and well-rounded, and I’d argue it makes you more intelligent.

 

I'll add on my current reading list. I'm rereading the Intelligent Investor right now and then will move on to these:

  1. How to Win Friends and Influence People - Dale Carnegie
  2. Blink - Malcolm Gladwell
  3. The 4 Hour Work Week - Timothy Ferriss
  4. Thinking, Fast and Slow - Daniel Kahneman
  5. More Money Than God
  6. Investment Banking
  7. Cold Steel

Not all of these are necessarily finance or investing oriented but I wanted a diverse spectrum of reading for the summer. Hope it helps.

 

Competition demystified Curse of the media mogul (basically competition demystified tailored to media companies) value and valuation by McKinsey quality of earnings the investment checklist by shearn

 

I really enjoyed, 'Confessions of an Anonymous Hedge Fund Manager' and 'How to become a Stock Market Genius'.

'Fooling Some of The People All of The Time', which was mentioned was an incredible read. I have been wanting to pick it up again. Also, I know Bill Ackman has a publication on one of his notable shorts.

Personally, I really enjoy Robert Shiller. Since one of his books was mentioned (Irrational Exuberance), I felt it appropriate to post a link to some of his academic papers.

http://www.econ.yale.edu/~shiller/online.htm

 

ackman's book is 'the confidence game.' it was a pretty decent read. he actually reads very bright; seems like a deep thinker. however, he just comes off a bit brutish in his actions.

 

Greenblatt - you can be a stock market genius

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
 

Could I ask why you recommend skipping Zweig's commentary in The Intelligent Investor? I've heard/read many other people say the exact same thing, but I don't really understand why, as it seems to me to be beneficial (even if it is marginal at best) and a good supplement.

I think the key here is to read it anyway and to think critically about it. It can only help to stay objective and to hear input from more sources and others' interpretations of Graham's work; this can lead to forming your own deeper understanding.

 

Jason Zweig is a columnist, and I'm biased to not trust the media, strike 1.

in all seriousness, the spirit of what he does is fine, he tries to make the book more relevant by citing modern examples but in the end he basically just advocates for indexing (that's at least the vibe I got), which is against every tenet of value investing. I think it takes away from what Graham was trying to convey because he restates what Graham says in less impactful prose and also harps on the point about indexing.

Graham said something along the lines of: any investor who cannot apply the principles of value investing correctly, diligently, and consistently, should just own the market. this is not to say that owning the market is the most appropriate thing, just that if you don't have the time/patience/brainpower to be a value investor, don't even try, just buy index funds.

also, I disagree with your point about reading it anyway, because you're reading more than one voice and it's hard to follow. I say read it all the way through, skipping Zweig altogether, so you get Graham's voice. then if you want, read Zweig's commentary all the way through, so you get his voice.

 

This might just be a terrible habit of mine (although it hasn't fucked me yet from what i can tell), but i never read prefaces/forewords/intros of books and always start from chapter one or pick and choose sections from ToC's.

 

The market wizard books by Jack Schwager I also find have nuggets of advice in there which are very useful... Particularly the latest version actually, because much more recent so good discussion about what the investors did during the crisis, and there is less focus on commodities. The interview on psychology with Van Tharp in the first book is very interesting.

I also think Investment Valuation by Damodaran. It is written almost as if it were a transcript of his lectures (in my opinion) which makes it very easy to read. I have read that cover to cover which I wouldn't be able to do for a normal textbook, it reads very well. Of course this is a different sort of book to the Intelligent Investor or Security Analysis, as contains less in the way of broad investment philosophy unlike Ben Graham or Phil Fisher etc. But I think on a practical level it is very useful, with actually a lot of advice on best practices, e.g. what adjustments you should be making to values reported on the balance sheet (e.g. capitalizing R&D expenses, adjusting debt for operating lease payments) and other things like that which you start to do automatically when comparing apples to oranges. Once the Ben Graham books have been read, I think more applied books like this are very useful from a practical standpoint.

Also... primers / books on the industry when looking at a company in a new industry. Of course, the most important things to estimate are probably revenue and cost growth. If looking at a company in a new industry, reading extensively about that industry and what is going to influence these key drivers is crucial, because if you have not understood the drivers properly all other analysis will be made largely redundant. So when looking at a company in a new industry then reading extensively about that industry to get a properly deep understanding of it is very important...

 

Martin Wolf - Fixing Global Finance Lewis - The Big Short Ahamed - Lords of Finance Soros - Complete Works Taleb - Complete Works (Really dislike the person, but he writes well) Malkiel - Random Walk Down Wall St Iacocca - His autobiography is fantastic When you're sick of business talk anything by Jon Krakauer

You're born, you take shit. You get out in the world, you take more shit. You climb a little higher, you take less shit. Till one day you're up in the rarefied atmosphere and you've forgotten what shit even looks like. Welcome to the layer cake son.
 

-One Up On Wall Street by Peter Lynch -- great read on how to spot investment opportunities and achieve a "ten-bagger" -Value: The Four Cornerstones of corporate finance McKinsey -- nice take on explaining value and how to increase it (driven by growth and ROIC)

I'm too drunk to taste this chicken -Late great Col. Sanders
 
Best Response

There's a great deal to be learned from investing books and so forth, but outside of actually learning through trial and error the best way to learn is to reverse engineer the theses of successful investments by those in the industry you respect.

For instance, as great as Buffett's shareholder letters are, reading hundreds of pages of quotes like, "Buy good businesses at good prices" isn't all that useful. If you really look up to the guys at Lone Pine and want to invest like them then pick one of their successful investments and go back to the filings from the time they initiated the position and try to look for what they saw during DD/idea generation that made the business an attractive investment.

[quote=patternfinder]Of course, I would just buy in scales. [/quote] See my WSO Blog | my AMA
 

ThirdAvenue also publishes an awesome investor memo. Cover all of their major plays in depth and even explain some of the alternate views; e.g. they were long Sun sub debt, but thought that many HFs would jump on easy cap structure arbitrage because sub and senior debt were trading too tight.

People demand freedom of speech as a compensation for freedom of thought which they seldom use.
 

The annual reports from Warren Buffet

‘The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price." W.B." we venture the motto, Margin of Safety.” Ben Graham
 

Haven't seen this posted so I'll throw it out there:

"Devil Take the Hindmost: A History of Financial Speculation" by Edward Chancellor

Must read for anyone involved in the markets. Insights into behavioral finance via interesting excerpts from history...don't know if its been update to include the more recent market bubbles/bursts.

 

For a technical perspective, I'll recommend the following:

Trading with Intermarket Analysis by John Murphy

Technical Analysis (Complete Resource for Financial Market Technicians) by Dahlquist and Kirkpatrick

Two very good books to get a better hold on behavioral investing, cycles, market sentiment, trends, and intermarket relationships for those that happen to give a freak.

 

1st and 2nd were the only ones actually written by Graham & Dodd. 3-5 editions were written by others but still keeping the original texts. the 6th edition (my understanding) is that it is identical in "meat" to the 2nd edition but just has forwards by several great investors. so the 2nd is supposed to be Graham & Dodd's masterpiece, and the 6th is the same thing, but with forewords by modern day investors.

any one of them will be helpful, and I've only read the 5th & 6th editions, so I can't give you specifics (there's Google for that), but honestly, if you read any of them, you're doing yourself a favor, if for nothing more than nostalgia.

 
thebrofessor:

1st and 2nd were the only ones actually written by Graham & Dodd. 3-5 editions were written by others but still keeping the original texts. the 6th edition (my understanding) is that it is identical in "meat" to the 2nd edition but just has forwards by several great investors. so the 2nd is supposed to be Graham & Dodd's masterpiece, and the 6th is the same thing, but with forewords by modern day investors.

any one of them will be helpful, and I've only read the 5th & 6th editions, so I can't give you specifics (there's Google for that), but honestly, if you read any of them, you're doing yourself a favor, if for nothing more than nostalgia.

1000 pages of dense, dense nostalgia!

"Everyone has a plan until they get punched in the face."
 

I think if you've read Graham then you know the basic concepts of value investing, as ^ suggested reading Margin of Safety by Klarman would be great to bring a more modern perspective and some specific examples. But I'd suggest branching out beyond basic value philosophy into understanding how to evaluate a business. You've probably heard of the concept of a moat/competitive advantage if you've been exposed to Buffett, but Competition Demystified by Greenwald is a great book which helps you understand how to identify a moat in reality. If you don't have a good accounting background, then focusing on improving there is probably one of the best things you can do - at some point you can read about investing philosophy all you want but if you can't put it into practice and understand financial statements then it's kind of useless.

 

Read BlackHat's thread on ramping up on a company. He's a value / GARP investor in the vein of Buffett / Munger.

As someone else noted, read Greenwald so you understand how to value companies and when to move from liquidation value to valuing and franchise. Greenwald's process is logical to me and explains the valuing of Graham type investments all the way to Buffett / Munger type investments.

 

One of the best books I've ever read. I'm not too big a fan of Greenwald because he's a little too focused on BV for my taste, which isn't as relevant to the industry I'm interested in. However, competition demystified is one of my business bibles.

 

Most everything by Soros.

[quote=Matrick][in reply to Tony Snark"]Why aren't you blogging for WSO and become the date doctor for WSO? There seems to be demand. [/quote] [quote=BatMasterson][in reply to Tony Snark's dating tip] Sensible advice.[/quote]
 

If you new to investing, I would recommend beefing up on Macro and Financial Economics before wasting too much time reading other stuff. If you want real world experience just read company SEC filings.

[quote=Matrick][in reply to Tony Snark"]Why aren't you blogging for WSO and become the date doctor for WSO? There seems to be demand. [/quote] [quote=BatMasterson][in reply to Tony Snark's dating tip] Sensible advice.[/quote]
 
Top Fund:

If you new to investing, I would recommend beefing up on Macro and Financial Economics before wasting too much time reading other stuff. If you want real world experience just read company SEC filings.

Yes, that makes a lot of sense. Go straight to the most difficult material for a someone who probably has just a very basic understanding of accounting and finance.

OP, I'd suggest One Up On Wall St by Peter Lynch or even some of Cramer's books. You just need to start getting more familiar with the material before getting into the heavier stuff. Have to create a foundation before you can build off of it.

 

I would add Thinking, Fast and Slow by Daniel Kahneman to the list. It's not really a finance book but it will give you an excellent background in behavioral econ and the cognitive aspects of investing. Kahneman is the godfather of the field and this an important book. I'd maybe throw some Taleb in there as well. Not that I agree with everything he says but it's good to get other perspectives and he definitely has some interesting ideas. Fooled by Randomness and Black Swan are good reads.

"This is the business we've chosen"!
 

Why are we so Clueless about the Stock Market by Mariusz Skonieczny F Wall Street Book by Joe Ponzio Economic Moats: The Little Book that Builds Wealth by Pat Dorsey Financial Statements: Step-by-Step Guide to Understanding and Creating Financial Reports by Thomas R. Ittelson Active Value Investing Book by Vitaliy N. Katsenelson

Hope this helps

 

Dividend playbook is probably a good start. And then I'd check out a commodity options book written by carley garner and paul brittain. The same principles can be applied elsewhere but they breakdown trade structure and do a pretty good job.

 

I highly disagree that learning by doing is blindly the best way. If you listen to people with PAs on this site, most people know shit about valuing companies. It's like in golf- you can practice all day but if you're practicing the wrong mistakes then you don't get any better. Definitely get a personal account too because the psychological side of investing- which is the hardest thing to learn- is very important to practice and isn't really tested until you have skin in the game. But also be humble and try to read and learn as much as possible. I'd start with Value Investing by Greenwald- great book.

 

Letters of warren Buffett is outstanding as well.

I've read all of these, and if you apply their principals correctly you WILL make money investing...and possibly know more than a lot of asset managers within big banks that are interviewing you, which makes you really impressive.

It's great if your interview turns into a conversation about each of your thoughts on investing

 

Thanks guys for the wonderful advice and the awesome new titles y'all suggested! Until now, I've only had hands-on investing experience - whatever I know has just been from trial and error and experience. Which is why I wanted to read some books to know what other people think about investing and how they go about it, not necessarily to follow them but just yknow 'diversifying' my world-view on investing...

On another note, I'm from India, so I mostly trade and invest in Indian companies... and I know zilch about American companies and the US economy in general. So, to gain experience in trading American Securities, which online trading system is best? I've heard good things about bloomberg's one... any suggestions? Also, any suggestions to get a crash course on American corporate structure and post-depression economic history of the US?

 
Kman062890:

Random Walk

This

Personally I agree that markets are efficient or near-efficient most of the time, but I think opportunities still exist. Obviously with so many brains watching the markets it doesn't get any easier to find them!

The way Ah see it, is that it took a revolution f a bihllion people for your darn short to work out!
 

margin of safety

"Respect others in their view, and demand that they respect yours. Love your life, perfect your life, beautify all things in your life."
 

Boomerang Fooling Some of the People All of the Time Finance and the Good Society Black Swan Zohan's Guide to Expedited Vaginal Penetration Anthony Bourdain's Cookbook ...superfreakonomics?

"Mr. Perkins poses an extreme risk to the market when drunk."
 

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"Mr. Perkins poses an extreme risk to the market when drunk."
 

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