Reblog: 10 Best Investing Books for Beginners


Generally, the most successful people in the world are also voracious readers. This is also true of the most successful value investors.

Both Warren Buffett (who used to read 1,000 pages a day when he was starting out) and Charlie Munger (who often advises young investors to “develop into a lifelong self-learners through voracious reading”) credit their habit of reading as a major contributor to their success. Ben Graham was an even more prolific reader than his successors – he would often quote the Latin and Greek classics and once translated a Spanish novel into English.

I also come across a lot of queries from many of our blog readers about books to read to understand investing better. So, here is an effort to collate a list of 10 such books which I feel is a must read for all investors.

#1 THE INTELLIGENT INVESTOR: THE DEFINITIVE BOOK ON VALUE INVESTING – BY BENJAMIN GRAHAM

The Intelligent Investor by Benjamin Graham

If you only ever read one investment book, then let it be The Intelligent Investor by Benjamin Graham. There’s a reason why Graham is called the “Godfather of Value Investing.” Benjamin Graham was probably the most influential investing figure of the 20th century, and The Intelligent Investor is probably the most influential investment book of all time. The Intelligent Investor is the value investor’s bible… keep this one on you always.

#2 THE ESSAYS OF WARREN BUFFETT: LESSONS FOR CORPORATE AMERICA – BY LAWRENCE CUNNINGHAM (EDITOR), WARREN BUFFETT

If The Intelligent Investor is the value investor’s bible, then The Essays of Warren Buffett are the value investor’s New Testament. Warren Buffett has been writing essays about investing and business for 50 years, and his genius – combined with his down-to-earth charm and clear prose – makes him perhaps one of the greatest educators as well as one of the greatest investors to have ever lived. Many of these essays can be found for free online, but The Essays of Warren Buffett by Lawrence Cunningham brings them all together under one roof.

#3 VALUE INVESTING: FROM GRAHAM TO BUFFETT AND BEYOND – BY BRUCE GREENWALD, JUDE KAHN, PAUL SONKIN, & MICHAEL VAN BIEMA

 Bruce Greenwald is the Robert Heilbrunn Professor of Finance and Asset Management at Columbia University and is one of the leading authorities on value investing. This book gives the most comprehensive overview of value investing of any investment book I’ve read, covering general techniques of value investing as well as profiles of successful value investors such as Warren Buffett and Mario Gabelli.

#4 STOCKS FOR THE LONG RUN: THE DEFINITIVE GUIDE TO FINANCIAL MARKET RETURNS & LONG-TERM INVESTMENT STRATEGIES – BY JEREMY SIEGEL

Jeremy Siegel‘s nickname is the “Wizard of Wharton” (he’s been teaching there for 45 years). His investment book Stocks for the Long Run is sometimes called “the buy and hold Bible.” The book makes the convincing argument that – after you account for inflation – equities are actually the safest investment in the long run, proving the point that most people should be long-term, passive investors in the stock market.

#5 THE LITTLE BOOK OF COMMON SENSE INVESTING: THE ONLY WAY TO GUARANTEE YOUR FAIR SHARE OF STOCK MARKET RETURNS – BY JOHN C. BOGLE

Investing is all about common sense. Owning a diversified portfolio of stocks and holding it for the long term is a winner’s game. Trying to beat the stock market is theoretically a zero-sum game (for every winner, there must be a loser), but after the substantial costs of investing are deducted, it becomes a loser’s game. John C. (“Jack”) Bogle is the founder of the Vanguard Group and creator of the world’s first index fund, and The Little Book of Common Sense Investing is a top recommendation of Warren Buffett’s. There’s actually a funny story that when Jack Bogle first met Warren Buffett, Jack recognized Warren, went up and introduced himself, and he said to Warren, “you know the thing I really like about you is you have rumpled suits just the same as I do” – and Jack and Warren have been good friends ever since.

#6 BUFFETTOLOGY: THE PREVIOUSLY UNEXPLAINED TECHNIQUES THAT HAVE MADE WARREN BUFFETT THE WORLD’S MOST FAMOUS INVESTOR – BY MARY BUFFETT & DAVID CLARK

Mary Buffett is Warren Buffett’s former daughter-in-law and her book Buffettology provides a good introduction to Warren Buffett’s investment approach. The book offers profiles and analysis of 54 “Buffett companies.” Read it for the qualitative discussion of Buffett’s investment style, and skim the mathematical chapters (which I didn’t find to be as useful).

#7 ONE UP ON WALL STREET: HOW TO USE WHAT YOU ALREADY KNOW TO MAKE MONEY IN THE MARKET – BY PETER LYNCH

Peter Lynch is one of the most successful investors ever – from 1997 to 1990, his Magellan Fund averaged a 29.2% compound annual return. In One Up on Wall Street, Peter Lynch explains how average investors can beat the pros by using what they know. According to Lynch, investment opportunities are everywhere: from the supermarket to the workplace, we encounter products and services all day long. By paying attention to the best ones, we can find companies in which to invest before the professional analysts discover them.

#8 COMPETITIVE STRATEGY: TECHNIQUES FOR ANALYZING INDUSTRIES AND COMPETITORS – BY MICHAEL PORTER

Studying Michael Porter is one of the first things you do in business school. Competitive Strategy by Michael Porter has transformed the theory, practice, and teaching of business strategy throughout the world. This book introduces Porter’s 5 Forces to help investors analyse industry attractiveness, as well as the 3 forms of a company’s strategy – low cost, differentiation, and focus.

 

 

#9 – THE ASCENT OF MONEY: A FINANCIAL HISTORY OF THE WORLD – BY NIALL FERGUSON

Niall Ferguson follows the money to tell the human story behind the evolution of our financial system, from its genesis in ancient Mesopotamia to the latest upheavals on what he calls Planet Finance. What’s more, Ferguson reveals financial history as the essential backstory behind all history, arguing that the evolution of credit and debt was as important as any technological innovation in the rise of civilisation. This is a great overview of all things money and a nice introduction to the world of finance.

#10 THINKING, FAST AND SLOW – BY DANIEL KAHNEMAN

Daniel Kahneman is a professor of behavioural & cognitive psychology at Princeton, winner of the 2002 Nobel Prize for economics, and author of the best-selling book on cognitive biases and heuristics: Thinking Fast & Slow. This book explains the natural biases that affect our judgment in everyday life, as well as in investing. If you want to be a great investor, then it’s critical to be aware of the biases and tendencies. This is a fascinating book, and Kahneman himself is actually the subject of Michael Lewis’s next book The Undoing Project.

The original article is written by Mastermind, Megabaggers and appears here.

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Reblog: Greatest Investors of All Time – How Did They Do It and What We Can Learn from Them


There are literally tens of millions of stock market and private investors today. The personal investing revolution has enabled anyone with a few hundred dollars to trade stocks. But we don’t have millions of great investors. Only a select few will ever be bestowed this title. So, how can you try to be one of them? You can emulate the people who were – or still are – the greatest. Below is our list of 8 of the greatest investors of all time; let us know in the comments below if you think we’ve missed out on any important names.

This list was compiled based on inputs from our members of Value Investing Clubs in UK, France, Belgium and Austria, and from our users at our FinTech company CityFALCON. Our focus at the Value Investing Clubs and CityFALCON remains on long-term fundamental investors who are looking to go through research to buy, hold and sell financial assets to generate strong higher than inflation returns.

Warren Buffett

We will just start off with the obvious case: Warren Buffett. Who doesn’t consider him one of the greatest, if not the greatest investor? Born just in time for the Depression (1930), Warren Buffett was born in Omaha, Nebraska, whence he eventually took his nickname “The Oracle of Omaha”.

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Reblog: Stock Valuation Part 2 – Understanding Graham Number


valuation

The first part of this post appears here.

Graham Number, an Introduction:

There are different ways of checking if a stock is undervalued at its current price, one of them and largely used is graham number. Graham Number is derived through a mathematical calculation to figure out the discount for any stock. Though it doesn’t work much for new age industries, branded plays, however consider this as a must check before investing into any stock. Sometimes this helps to build conviction too.

What is the ‘Graham Number’?

The Graham number is a figure that measures a stock’s fundamental value by taking into account the company’s earnings per share and book value per share. The Graham number is the upper bound of the price range that a defensive investor should pay for the stock. According to the theory, any stock price below the Graham number is considered undervalued, and thus worth investing in. The formula is as follows:

formula

Breaking Down ‘Graham Number’

The Graham number is named after the “father of value investing,” Benjamin Graham. It is used as a general test when trying to identify stocks that are currently selling for a good price. The 22.5 is included in the number to account for Graham’s belief that the price to earnings ratio should not be over 15 and the price to book ratio should not be over 1.5 (15 x 1.5 = 22.5). It does leave out many fundamental characteristics which make up a good investment, and is not effective for the majority of medium- to large-cap stocks.

For example, if the earning per share is $1.50, book value per share is $10, the Graham number would be 18.37. If the stock price is $16, you should buy the stock as it is seen to be undervalued.

Why Graham Created This Valuation Formula

It’s no secret that Graham was a cheap stock investor who bought baskets of stocks instead of concentrating.

His approach was much mechanical.

His first criterion was cheapness and that was usually enough. But after going through countless stocks, here’s what he says.

Our study of the various methods has led us to suggest a foreshortened and quite simple formula for the valuation of growth stocks, which is intended to produce figures fairly close to those resulting from the more refined mathematical calculations. – The Intelligent Investor

In 3 short bullets, he used the formula himself for;

  • Shorthand
  • Simplicity
  • Estimate of intrinsic value

It’s definitely not the golden rule and it’s not something he went with blindly, but it’s a good approximation and a good starting point to use in your investigation.

After all, Buffett says that

It is better to be approximately right, than precisely wrong.

The original post appears on ride2rich.com by Mastermind and is available here.


Reblog: Who Is Benjamin Graham?


This article appears on valuewalk.com and can be found here.

Who Is Benjamin Graham?

History has designated Benjamin Graham as the Father of Value Investing. He not only developed the concept but also lived it, both as a practitioner with a remarkable track record and as a professor who profoundly impacted his students.

Among his many accolades, Father of Value Investing is Benjamin Graham’s greatest title. Some of his other designations are Dean of Wall Street and Dean of Security Analysis

Father of Value Investing

His research paved the way for today’s stock market analysts by introducing the concept of fundamental analysis and raising awareness of the correlation between stock prices and a company’s intrinsic value.

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