Book Recommendations

Writing a book means that you also read a lot of books. Here is a selection of great books that I either reference in Excellent Investing or have guided my thinking on investment over the years.

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General Investing

100 baggers

by Christopher Mayer

Inspired by a classic study of stocks that had generated 100x returns for investors by Thomas Phelps, Mayer analysed all US stocks that had become 100 baggers from 1962 – 2014 looking for the characteristics that they had in common. This book describes those findings and how investors can use them to find stocks with the potential to generate phenomenal returns.

The Art of Execution

by Lee Freeman-Shor

Freeman -Shor analysed some 31,000 trades of over 300 professional investors to whom he had entrusted investment capital to find what strategies work in investing. He found that how investors responded to their losing and winning positions largely defined their success as an investor. This book details those winning habits in a way that is easy to read and apply.

You Can Be a Stock Market Genius

by Joel Greenblatt

This is one of the best investing books ever written, not least because Greenblatt himself generated 45% compound annual returns for 19 years using these methods. It describes how investors can generate outsized returns by investing in ‘Special Situations’: opportunities where other investors are selling for reasons unrelated to the true underlying value of the business. The best known of these – spin-offs – can still a rich source of returns today.

Excess Returns

by Frederik Vanhaverbeke

A comprehensive look at the methods that the world’s greatest investors have used to generate excess returns. Not the easiest book to read, but the sheer breadth of market knowledge packed into this book make it well worth persevering with.

Reminiscences of a Stock Operator

by Edwin Lefevre

This classic of the genre is a thinly veiled biography of Jesse Livermore, a 1920’s market speculator who both won and lost a fortune multiple times. Packed full of market wisdom and ultimately folly as Livermore failed to hang on to his fortune.

Hedge Fund Wizards

by Jack D. Schwager

This is the latest in Schwager’s series of ‘Wizards’ books and describes the unique strategies of some of the world’s best hedge fund investors. All the ‘Wizards’ books are great but, given its more up to date examples, this is probably the most accessible. What is often surprising is how different successful approaches can be, yet still generate market-beating returns.

Warren Buffett

Warren Buffett's Ground Rules

by Jeremy Miller

Using source material from the letters that Warren Buffett wrote to shareholder in his Buffett Partnership Limited, this book describes Buffett’s early investment strategy and examples from his early success.

The Snowball

by Alice Schroeder​

THE definitive Buffett biography. Learn the characteristics, personality and approach that made Buffett one of the world’s richest men.

Tap Dancing to Work

by Carol J. Loomis

This book is a compilation of Fortune articles on Buffett, giving great insight into the intellect and philosophy that has made him one of the world’s richest men.

Avoiding Frauds

Lying for Money

by Dan Davies

A great taxonomy of corporate fraud: starting with the most basic way frauds can be perpetrated to the most complex, illustrated with some interesting examples. One of the most interesting aspects is Davies’s realistic assessment of how hard it is to avoid corporate fraud and how we may not want to completely avoid it, due to the costs associated with checking. A real eye-opener.

Financial Shenanigans

by Howard M. Schilit

This book reveals all the tricks that management can use to make their earnings or cashflow appear better than reality, and how you can understand the true underlying picture from the accounts.

Quality of Earnings

Thornton O’Glove

Although it is now over 30 years old, the concepts in this book are still as relevant today: spotting where companies may be manipulating their earnings.

The Sleuth Investor

by Avner Mandelman

A fascinating book describing how investors can gain an edge doing the kind of on the ground investigative work that most people aren’t willing to attempt. Worth reading for the account of uncovering the Bre-X fraud alone (although Mandelman uses a pseudonym for the company in the book.)

Dead Companies Walking

by Scott Fearon

Using examples from his fund, Fearon describes the many ways that companies can fail and the ways that investors can profit from those failures.

The Signs Were There

by Tim Steer

A relatively recent book that uses many real-world examples of how accounting information could have been used to avoid poor investments. Although some of the examples may be familiar to experienced investors, this is a relatively easy read given that it can be a dry topic.

Value Investing

The Education of a Value Investor

by Guy Spier

An autobiographical look at Spier’s discovery of value investing and the positive impact it has had on his life following a lunch with Warren Buffett. In the latter part of his book he shares practical wisdom on how he manages his life in order to live by the principles to which he aspires.

Choose Stocks Wisely

by Paul W. Allen​

Accounting Professor Paul Allen shows how deep value investments can still generate big rewards in today’s market by focussing on the assets of unloved businesses. He shows readers practical ways to use accounting knowledge to uncover the asset value of a business and buy at a conservative discount to that value while avoiding companies whose balance sheet may be too weak to support a recovery in fortunes.

Contrarian Investment Strategies

by David Dremen

By analysing long-term return data, Dremen shows how unconventional thinking in markets can pay-off and different ways of taking advantage of going against the crowd. A classic of the genre.

Quant Investing

Expected Returns

by Antti Ilmanen

This is a weighty book, both in size and tone. However, there is probably no more exhaustive study of what factors have generated returns to investors and why they have done so. If you want to understand the detail of asset class returns in all conditions, this book comprehensively delivers.

Quantitative Value

by Wesley R. Gray and Tobias E. Carlisle

Gray and Carlisle wrote this book as a critique of Joel Greenblatt’s ‘Magic Formula’. They show, using extensive quantitive data, that the performance of the Magic Formula appears to be completely down to the ‘Value’ metric it uses and that the ‘Quality ‘ metric actually detracts from the performance of the strategy. They go on to show, using quantitative data, how different value metrics perform over the long term and ways in which performance can be improved, for example, by excluding companies that may be at risk of being earnings manipulators.

The Inefficient Stock Market

by Robert A. Haugen

Haugen’s books are classics, although that sadly means that they are often expensive to buy. He was one of the first people to challenge the efficient market hypothesis orthodoxy using data. He goes on to explain the ways that market structures, such as leverage constraints and fund manager compensation, lead to these inefficiencies, finally proposing a way that these can be taken advantage of using quantitative methods. Although quite academic in nature, it should be accessible to most investors with a mathematical background.

Psychology

Influence

by Robert Cialdini

This is one of my favourite books of all time. Cialdini’s genius was realising that his research into what influences us in laboratory conditions was limited, yet one group of people understood what works, even if they didn’t always understand why: salesmen. So, he got a job as a used car salesman and took other such jobs. In each case, he analysed why their sales techniques worked and categorised them into six main ways we are influenced. This book will open your eyes to how these techniques are used and how you may be being influenced without even realising it.

Pre-Suasion

by Robert Cialdini

It took Cialdini 32 years to follow up his first book: Influence, and it was worth the wait. Building on the understanding of what influences us, pre-suasion describes how we can craft an environment ahead of time that will make others susceptible to agree to our requests when they are presented. Another ground-breaking book.

Thinking, Fast and Slow

by Daniel Kahneman

Kahneman is THE authority on behavioural biases. This book is his comprehensive description of the field, its history, development, and where the current academic consensus lies on this fascinating topic. It is highly relevant to investors as we seek to make more optimal decisions.

Beyond Greed and Fear

by Hersh Shefrin

This is an extensive exploration of the way our investment decisions are led astray by behavioural biases with many real-world examples. Worth reading for the account of Bill Clinton’s loss aversion alone. The biggest weakness of the book is that it doesn’t contain many practical ways to overcome these biases.

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Predictably Irrational

by Dan Ariely

Dan Ariely writes highly entertaining books that explain the ways that our decision-making is consistently biased using examples from his academic work. This is the first in the series, and if you enjoy this, he has written additional highly-engaging books that explore this topic further.

The Undoing Project

by Michael Lewis

Michael Lewis adds the personal narrative to one of the greatest and most unlikely academic collaborations of all time: that between Daniel Kahneman and Amos Tversky as they pioneered what later became behavioural economics, the study of our biases in decision-making. This adds colour and narrative to that journey that you don’t get form more academic books on the subject.

Portfolio Construction

The Dhandho Investor

by Mohnish Pabrai

With a great series of examples from business and investing, Pabrai describes his method of ‘Dhando Investing’: waiting for investment opportunities where the upside potential is very large but the downside risk is very small. These opportunities are rare, so when they occur, Pabrai suggests that investor allocate significant capital to these investments.

A Man for All Markets

by Edward O. Thorp

A mostly autobiographical account from the legendary Thorp. He describes both his early attempts to gain an edge through the application of science and mathematics to games of chance, such as blackjack or roulette, and also his later strategies of successfully trading stock-market options; having independently derived a version of the Black-Scholes option-pricing equation. Applying these principles in his hedge fund, Thorp generated roughly 20% compound return, with just 6% volatility, over more than 30 years.

Fortunes Formula

by William Poundstone

This book describes the development and application of the Kelly Formula to betting and the stock market. It is an interesting read, with many great stories of the characters involved, without skimping on the mathematical nuance of the theories.

Business & Life

Superforecasting

by Philip E. Tetlock and Dan Gardner

A large part of investing is about making predictions about the future. Unfortunately, most people are more at making predictions and perform worse than simple models such as linear trend or mean reversion. In his studies of expert judgement, Tetlock found that a certain type of person made significantly better predictions than others – he called them superforecasters. Adopting the superforecasters approach will significantly improve your ability to make good forecasts.

Outsiders

by William N. Thorndike Jr.

William Thorndike presents eight CEOs who were great capital allocators and had delivered tremendous returns for shareholders. He found that they all shared certain characteristics which led to their success, and describes these in detail.

The Checklist Manifesto

by Atul Gawande

Using examples from his medical practice, and other industries such as aviation, Gawande describes how checklists can avoid preventable errors. After reading this, you will understand the importance of codifying your decision-making framework into a simple and repeatable format that can eliminate common errors.

The Art of the Good Life

by Rolf Dobelli

An interesting perspective on what success is and ways to achieve it. It will challenge your thinking on what it means to live a ‘good life’.

Happiness by Design

by Paul Dolan

Using the latest scientific research, Dolan explains what we understand about happiness, how it is measured, and how we can make deliberate choices to increase both the pleasure and meaning in our lives. This book will change how you approach your life goals.

Spy The Lie

by Philip Houston

Being able to spot dishonesty in others is a key skill for knowing which company managements to entrust your financial assets to. There are no foolproof methods to tell if someone is lying, but this book gives you all the key signs that someone may not be being totally honest, enhancing your ability to tell fact from fiction.

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