Books on Investment

Here are some books on Investment that I would like to get to.

I have several of these but I have not yet made it to putting them on the night stand queue.

The Big Short: Inside The Doomsday Machine
Michael Lewis
After the 2008 collapse rocked the financial world, many tried to make heads and tails of the housing and credit crises to figure out how it all went down. Michael Lewis, author of Moneyball and Liar’s Poker, does it best.

The Intelligent Investor, by Benjamin Graham (Collins, 2005)

First published in 1949, this investment classic has sold millions of copies and is the bible for many value investors.

A quantitative investor at heart, Graham believed that all the qualitative aspects of a company would manifest themselves in the financial statements. By understanding the statements and trends therein, Graham could correctly assess a company’s prospects.

The first 10 chapters cover investment basics like investing vs. speculation, stocks vs. bonds, inflation, advisers, “defensive” vs. “enterprising” investing and margin of safety. The last 10 chapters focus on securities analysis for the lay investor and include topics like financial statement analysis, per share earnings and assessing management. Lots of examples are used, and while some may be a bit dated, the key points are driven home. Warren Buffett calls it one of the best investment books ever written.

Common Stocks and Uncommon Profits, by Philip Fisher (Wiley, 2003)

Fisher’s qualitative focus nicely complements nicely Graham’s quantitative focus. You really need both.

Fisher is one of the original growth-stock investors, and his thesis for accumulating great stock market wealth is to invest in a small portfolio of companies that can grow sales and earnings over many years. If the investment is carefully chosen, you might hold it indefinitely, earning multiples on your investment.

But how does one find such gems?

Fisher provides the answer by listing 15 qualities a company should have to be considered a superior investment. For example: How big is the addressable market, and does the company have the products and infrastructure to capture a reasonable market share? How much does a company spend on research and development as a means of creating new demand once the current product line matures?

Fisher is well known for his “scuttlebutt” approach to answering these questions. This involves speaking with employees (or better yet, ex-employees), customers, vendors and competitors to obtain inside knowledge of a company’s prospects. He teaches us the right questions to ask.

Fisher also provides a list of “10 don’ts for investors,” which includes such nuggets as “Don’t buy promotional companies” and “Don’t follow the crowd.” A worthwhile read.

Competitive Strategy, by Michael Porter (Free Press, 2004)

Those interested in learning about how to assess companies and industries, and the factors affecting the profitability of each, should read this book.

A Harvard Business School professor, Porter identifies two key sources of competitive advantage as cost leadership (economies of scale, proprietary technology, etc.) and product differentiation (focus on product attributes the buyer sees as most important).

Porter also examines key factors like bargaining power of suppliers, bargaining power of customers, competitive landscape, threat of substitute products/imports, barriers to entry and corporate culture.

His book provides a solid foundation for understanding why some companies create value and do well while others destroy it and fare poorly. It’s chock-full of real-life examples that relate theory to real-life situations. Since initial publication in 1980, Porter’s book has been used by managers and business students worldwide to help understand the forces behind competition and profitability.

Strategic Bond Investor, by Anthony Crescenzi (McGraw-Hill, 2002)

Crescenzi, a frequent media commentator, has written a fixed-income bible that merits a place on any serious investor’s bookshelf. He really understands the bond market and in plain language provides illuminating explanations of different types of bonds and how they perform in different types of markets.

Crescenzi demystifies yield curves and other indicators that can be used to predict the direction of the economy. Economic reports are examined, including how they can influence bond prices and profit opportunities. Important topics like risks, credit ratings, liquidity and pricing are also covered.

The book makes liberal use of charts, tables and diagrams and provides investors with the tools they need to participate in today’s bond markets. Very well organized, the book correctly conveys that bonds can be every bit as exciting as stocks these days.

A Random Walk Down Wall Street
Burton Malkiel
Malkiel’s book takes a historical look at the stock market, giving investors necessary context for making investment decisions. He applies the mathematical idea of “random walk” to the market, and concludes that most investors are best served by passively investing rather than trying to outperform the market.