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‘Absolutely superb book for any investor…lots of investing wisdom distilled down to some totally actionable insights’
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.
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.
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.
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.)
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.
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.
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.
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.
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.
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.
(For that you will need my book!)
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.
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.
Business & Life
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.
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.
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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