Books

I have read many books on investing, however, listing all of them would be a waste of your time.  There is no reason for you to hear about everything.  It makes much more sense if I list books that impacted my thinking and drove me into my current investment strategy.  Some of these books may seem to be listed “just to show that I read them”, but this is not the case.  If you take investing seriously, you should read all of these (and probably more).

The Intelligent Investor by Benjamin Graham

I realize that this is on everyone’s shelf already, but it has to be on here.  This book is not about investing; it is a book about how to think about investing.  Your mindset is the single-most important thing to regulate and keep under control as you look through the stock market.  Without it, it doesn’t matter how hard you work; you will get burned.  There are 4 editions of this book and I’ve read two of them.  In general, the ideas haven’t changed much through the years.  It is a good sign of something that is everlasting if it doesn’t much matter which edition you read.  Price vs. Value, Mr. Market, and Margin of Safety all wrapped up in one book.

Common Stocks and Uncommon Profits by Phil Fisher

This book is fantastic.  It will make you a great businessman and a great thinker about business.  I have never learned more about how to view companies or industries than I did from Phil.  His 15 points of light are what makes it truly great, but I also enjoyed his discussion of operating leverage, scuttlebutt, and his humorous example of “quibbling” over eights & quarts (his poor friend!).  The write-up from his son, Ken, is also interesting, although more personal than applicable to the real-world. I would not recommend this as one of your first books on investing- you should learn how to value a company and how to think about the stock market before you become a great businessman.

The Dhandho Investor by Mohnish Pabrai

I really enjoy Pabrai’s style of writing, but there are some of the things within this book are slightly off (namely forgetting to pay yourself a salary when opening a hotel- the profits don’t include the time you put in & the opportunity cost of not having a job then).  Overall, I loved this book, however, and have read it numerous times.  His write-ups on companies like Frontline & Stewart Enterprises were extremely informative and his investment strategy is very interesting.  I do not like his use of DCF models, but the companies he found were undervalued by my standards as well.  He also throws in some Indian culture and relates it to investing.  Not as timeless as the books above, but great nonetheless.

Mosaic: Perspectives on Investing by Mohnish Pabrai

This book is very hard to find.  It is not worth the price on Amazon- so don’t pay it.  If you can find a cheap copy or a library you can check it out from, definitely go for it.  It is a collection of Pabrai’s early articles and has some extremely important messages.  I find myself using many of his arguments & his principles in thinking about the markets.

The Contrarian Investor by David Dreman

This book is rooted deeply in statistics and psychology.  I do not like statistics on companies because it tells you, on average, how they are expected to perform based on their current price.  It does not give you situation-specific or firm-specific information.  That being said, the psychology aspects to this book are great.  He brings in the different forms of biases that people use in everyday life to make their lives easier, but to use them in analyzing companies would be catastrophic.  It is important to be aware of these biases in hopes of developing a strong mental framework.

Margin of Safety by Seth Klarman

I really wish some publishing house would realize the power of this book and REPRINT IT! It is so good!  And yet, it is out of print as well as very hard to find.  You probably won’t find it in libraries, but don’t pay the Amazon price; its not worth it.  This book is similar to The Intelligent Investor in that it is a book about how to think about investing, not how to invest.  I like his thinking and his writing style.  Klarman is more of a diversified investor than I like to be, but his approach is interesting and he brings many principles to the table with his book.

You Can Be a Stock Market Genius by Joel Greenblatt

This book sounds cheesy, but believe me, it isn’t.  Joel writes, in simple terms, how to use various obscure securities to obtain great results in the market by reading about hidden areas of the market that nobody else really knows about. When I finally graduate college and work for myself, I will have enough time to not only look at stocks, but also many of these obscure securities.  I’ve read this book 4 times- it is very enjoyable and humorous.  Definitely check this out.

Monopoly Rules: How to Find, Capture, and Control the Most Lucrative Markets in Any Business by Milind Lele

Milind Lele is another, like Phil Fisher, who will increase your ability to think as a businessman.  I love his examples of competition and how to keep up with industries for their future change. A book full of case studies, great commentary, and interesting concepts.  Do not read until you understand investment valuation & management first. No reason to confuse yourself the way I did; I bought Coca-Cola before I understood valuation.

Fooling Some of the People All of the Time by David Einhorn

If you’ve read my blog, you know Einhorn is one of the investors whom I follow in SEC filings. This book is the reason why. His first few chapters changed my mindset on how to set up a fund and invest in the market; the case studies, while short & sweet, provided insight into new strategies I hadn’t considered in the past. The numerous examples of failures within the SEC, SBA, and attorney general’s office are quite informative and make you feel as if you’d been short Allied the whole time. I’ve talked to numerous people about the 5 investment books everyone should read, and this is definitely one of them.

I will add more books if I feel as though they belong on the list.  Other interesting authors include Peter Lynch, Robert Hagstrom, Bruce Greenwald, and anything about Charlie Munger/Warren Buffett.

One Response to Books

  1. strepper says:

    I might have to borrow your Seth Klarman book next year. I’ve followed him on gurufocus for awhile now and have been very impressed… with his strategy and (more importantly) his consistent success in changing markets.

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