Best books for HF investing?
Hi all,
I’ve a few good books to hand like the intelegent investor & thinking fast and slow. (Both recommended to me by a PM).
But I’m looking for some books (or resources actually, like pdf/website or other) that will actually give me an insight on how to invest. How to break down a company and look at it from different angles; what to keep in mind when assessing different companies in different sectors with different influences on the financial statements; and what pitfalls to be aware of when forming perceptions.
The style of investing I’m interested is stereotypical Activist, long/short, value creation, fundamentalist. Such as a typical 2+2+2.
Please suggest books & resources you have found most useful in building your fundamentalist skillset. Cheers
Expectations investing is a decent read.
I dont think you will find a book that “teaches” you to do the actual analysis, especially in pod world, but I found expectations investing to be a good basis to think about things.
Thanks, I’ll take a look.
I think what i’m really struggling with is the gap between comparing with peers financials & actually being able to form an investing opinion on a particular company. I feel there are so many unknowns its hard to have conviction.
Think critically about the businesses, what’s different, what are the various exposures, what are their competitive advantages/moats, does one have more exposure to faster growing products but weaker margin benefits from scale? Etc
To be honest this is the job you’re being hired to do. In an ideal world, analysing businesses would be your greatest source of edge.
Less of my trades are “A is a better business than B”. They tend to be more like, “this trend is effecting the biggest drivers in this industry/segment, A has better exposure to it because of (reasons specific to the company or their market niche etc), whereas B focuses more on this other thing which has done well but is now increasingly saturated. I think the trend I have observed is durable and meaningfully affects P&L. That’s your first bit of business analysis.”
You then consider historic performance and valuation to take a view on R/R and whether there’s a trade here assuming this isn’t already priced in.
Mind you this is for L/S equity specifically, and more for pods and SMs which trade 3-9 month views. My pod is very relative value focused, very big on pairs and compounders, but others focus on different things.
More money than god is a good read
Pitch the Perfect Investment by Sonkin
In terms of different things impacting financial statements for different companies/sectors, Financial Shenanigans is a great read.
Unfortunately banking doesn't teach you shit about investing (I started in a coverage team at an IB), if it's just 2yrs in an IB program that you've done, then you have a lot of learning to do
Roughly in order, for a theoretical value investing foundation for a newbie:
Then, start doing 1) investment case studies, 2) studying history of specific businesses, and/or 3) getting up to speed on numerous companies in a specific industry. Requires a lot of time and reps. Where to focus will depend on what type of fund/investing you want to get into (e.g. special sits vs. activist vs. LO concentrated vs. SM L/S vs. sector specific market/factor neutral pod shop, etc.)...
Then, start participating in stock discussions and submitting pitches, if you are good then people will notice, very good then you might get offered a job
Excellent list. I like and would recommend everything you included except "Thinking in Bets." All fluff and filler with no original ideas. For anyone reading this comment - do not waste your time with this junk.
For the Baupost shareholder letters, are you referring to the collection of letters from 1995 to 2001 (a 58 page PDF), or do you have some other source that exhaustively (or at least has more than the range mentioned above) collects these letters?
Where do you get case studies?
second this
Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Pedersen
It's a really good one
Market wizards books are good. But don't over read these books, start doing investing and learn from experience ASAP.
Drobny (Macro but Good), Peter Lynch, Capital Returns, Howard Marks, Einhorn's Allied Capital Book, Pitch the Perfect Investment, Expectations Investing, Kahneman, The Art of Execution, Dead Companies Walking, Margin of Safety, Madness of Crowds, Wisdom of Crowds, Schwager's Wizards Books. Also, I don't think most guys do pure value nowadays, that'd fuck your sharpe and your short-term returns. Value/Fundamental with Macro Overlays is the main thing so you need to brush your macro too. Even guys who say they're pure value are sorta expressing some macro trend; unless your real money or some well-established guys whose LPs dont gaf short-term like TCI
Any books recommended to learn macro further? Hedge fund market wizards maybe? They interview some solid macro hfm’s
Hedge fund market wizards covers all sorts of traders, from macro to pure value to black box. The biggest guide to macro is the alchemy of finance (the trading experiment and the mesh about the imperial circle is amazing)
Dhando investor was a good read, so was greenblatt’s book on special sits which I forget what it was called, distressed debt by moyer if you’re interested on that side of investing
Greenblatts' book is called "You can be a stock market genius". Title is misleading given its on special sits and more specifically spin-offs. I work in event and it's probably the best book I've read. Would also recommend Dead Companies Walking for event.
Agreed about the greenblatt book
For activist investing Dear Chairman is a really great read. Doesn’t teach you how to do the job but it’s a good look into some different campaigns through history
Read Marks and Klarman if you want to underperform in the current regime. Marks rarely has anything of value to say in any of his books/letters, and the whole idea of margin of safety, especially within equity investing, is flawed.
So any recommendations off the top of your head that are appropriate in today's market? - from the same fundamentalist/equity/(non-algo) approach.
Soros and Druck are arguably the greatest investors of all time. Read Soros stuff. Read about both of them, read stuff from people in their circle who are stylistically similar.
Read Common Stock Uncommon Profits to actually learn about the power of growth investing vs. value investing.
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