1. The Intelligent Investor – Benjamin Graham
This was the first book on value investing ever read by Warren Buffett, who describes it as ‘by far the best book on investing ever written’. The Intelligent Investor was first published in 1949, and its fourth and final edition was published in 1973.
As this book suggests, the hallmark of Graham’s philosophy is not profit maximization but loss minimization. In this respect, The Intelligent Investor is a book for true investors, not speculators or day traders. Through this book, Graham provides, in layman terms, proper guidance to individuals in adoption and execution of a sound long-term investment philosophy. Graham mentions, where the speculator follows market trends, the investor uses discipline, research, and his analytical ability to make unpopular but sound investments in bargains relative to current asset value. Graham coaches the investor to develop a rational plan for buying stocks, and argues that this plan must act like a wall against emotional behavior that will always be tempting during abrupt bull and bear markets.
2. One Up On Wall Street – Peter Lynch
Apart from The Intelligent Investor, there is no better book to get started for beginners than Peter Lynch’s One Up on Wall Street. The real beauty of this book is the easy-going review of the simplistic stock picking style that brought Lynch so much success in his profession as a fund manager at the US mutual fund company, Fidelity.
This book is low on number crunching but high on anecdotal stories. Moreover, readers are given a clear picture on how to get off to a good start in the markets. One Up on Wall Street offers insight into the mind of one of the greatest money managers of all times. Using humor, Lynch helps you discover that he is a normal guy who thinks rationally, believes in doing his own independent research on companies, asks plenty of questions, and gets caught off guard by the market at times, just like anyone else. Anyone thinking about buying individual stocks must read this book before they ever make their first stock purchase.
3. Common Stocks & Uncommon Profits – Philip Fisher
Philip Fisher was one of the most influential investors of all time. The best-known of his followers is Warren Buffett who has said on some occasions that ‘he is 85% Graham and 15% Fisher’.
Fisher’s investment philosophies, recorded in his investment classic – Common Stocks and Uncommon Profits – are still relevant today and are widely studied and applied by investment professionals. ‘Common Stocks…’ was in fact the first investment book ever to make the New York Times bestseller list. In this book, Fisher writes about his famous ‘fifteen points to look for in a common stock’, which act like a gospel for the entire value investing community. These points reflect common sense: Is there a market for the product? Are sales, production and research, the three cornerstones for success, in place? He stresses the need for an investor to know about the company and its management before investing in it.
4. The Warren Buffett Way – Robert Hagstrom
The Warren Buffett Way outlines the principles of value investing practiced by Warren Buffett.
These principles include purchase of businesses with excellent long-term prospects, purchase of businesses at a large discount to their intrinsic value, purchase of businesses with a high return on invested capital, and purchase of businesses with honest managers.
In essence, this book captures all the learning that Buffett has used and practiced to build his successful investment career. In simple terms, this book has the power to change the mindsets of all those who are just beginning with their stock market investments, and even those who are stuck with bad investments and know not what to do and to come out of their troubles.
This book, Hagstrom suggests, will assist those investors who are willing to help themselves by doing their own thinking, using relatively simple methods, and having the courage of their convictions. This is what the Warren Buffett way is all about.
5. Essays of Warren Buffett – Lawrence Cunningham
If you are ready to read all the annual letters that Warren Buffett has sent to his shareholders since 1965, you can visit his company’s Berkshire Hathaway’s website. But if you are looking out for a resource that compiles the core learning from all these letters and present in an easy-to-understand reference, this book is for you.
In fact, this book presents in one place all the priceless pearls of business and investment wisdom, woven into a delightful narrative on the major topics concerning both business managers and investors. ‘Essays of Warren Buffett’ is recommended for anybody interested in business or investing. Almost any investor or business manager will learn something from reading this book. Though most of the essays in the book are a few years old, their basic lessons have not gotten outdated.
Also, while the book is not really an easy read for beginner investors, with a little effort to understand the financial terms, the readers of The Essays of Warren Buffett will be amply rewarded.
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