UnderGround Forums
 

Money, Business & Finance Ground >> Which Money/Finance books should I read?


2/6/13 2:35 PM
Ignore | Quote | Vote Down | Vote Up
justin@gosscpa.com
10 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 2/24/03
Posts: 1521
salyer36 - Thanks. It isn't sexy, but it is my investing style and I like it.

Thanks for the reply! I'll be exploring this for a while. Voted up!
2/6/13 8:40 PM
Ignore | Quote | Vote Down | Vote Up
BertR
Send Private Message Add Comment To Profile

Member Since: 11/10/09
Posts: 293
http://www.forbes.com/sites/monteburke/2012/06/29/the-fishing-guide-who-hooked-hedge-fund-titan-bill-ackman/

Bill Ackman, the billionaire value investor hedge fund manager, was impressed by the character of a fishing guide when he went on a trip to the bahamas so he offered him a position at his company knowing he had no experience if he read some books before calling him

The list:

01 - The Intelligent Investor by Benjamin Graham
02 - Security Analysis by Benjamin Graham
03 - The Warren Buffet Way by Robert G. Hagstrom
04 - The Essays of Warren Buffett: Lessons for Corporate America by Lawrence A. Cunningham and Warren Buffett
05 - Confidence Game: How Hedge Fund Manager Bill Ackman Called Wall Street's Bluff by Christine Richard
06 - You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits by Joel Greenblatt
07 - Quality of Earnings by Thornton O'Glove
08 - Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor by Seth Klarman
09 - Beating the Street by Peter Lynch
10 - One Up on Wall Street: How To Use What You Already Know To Make Money In The Market by Peter Lynch and John Rothchild
11 - Fooling Some of the People All of the Time, A Long Short (and Now Complete) Story, Updated with New Epilogue by David Einhorn and Joel Greenblatt
2/8/13 9:57 AM
Ignore | Quote | Vote Down | Vote Up
LeftBench
42 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 8/5/02
Posts: 9433
This thread is great so far. Thanks for all the great books and links. We have a lot of reading to do!
2/20/13 2:43 PM
Ignore | Quote | Vote Down | Vote Up
LeftBench
42 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 8/5/02
Posts: 9460
I just purchased:

"The Intelligent Investor" by Benjamin Graham

"The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich" By David Bach

"The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future" by Chris Guillebeau

"One Simple Idea: Turn Your Dreams into a Licensing Goldmine While Letting Others Do the Work" by Stephen Key


I plan on picking up "The Wealthy Barber Returns" very soon, but it wasn't on Amazon.
2/20/13 9:19 PM
Ignore | Quote | Vote Down | Vote Up
salyer36
11 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 11/3/02
Posts: 2161
Good man. Enjoy.
3/20/13 12:12 PM
Ignore | Quote | Vote Down | Vote Up
LeftBench
42 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 8/5/02
Posts: 9498
The only one I've read so far was "The $100 Startup" by Guillebeau.

Great book, really got me motivated. I've been working hard at some things I'd been thinking about for a while. I have big plans!
3/25/13 10:44 AM
Ignore | Quote | Vote Down | Vote Up
blushgirl412
2 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 5/10/05
Posts: 4259
4L
3/30/13 10:52 AM
Ignore | Quote | Vote Down | Vote Up
Mphelan
22 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 6/10/09
Posts: 977
Not a book, but the annual Berkshire reports are gold.

Also, if you're interested in investing, put together a stock pitch. Make it about ten minutes with a written report and an Excel model to back it up.

Then pitch it to any friends you have in finance. They will pick apart the things you're not doing right, recognize the things you are, and make note of what you're missing. Especially important is their critique of your investment theses. Having a beautifully thought out valuation that allows you to invest with a 50% margin of safety is worthless if there's not catalyst for the equity to revalue in the near enough future to make the upside worth the opportunity cost and potential for downside risk.

I am really encouraged to see a lot of people on here recommend the Value investing books. Following value investing principles is the safest way to not lose money, because even if the "undervalued" stock is not, in fact undervalued or does not get revalued, it's probably got less downside than a momentum play gone wrong.

I think the really important thing is to separate Value Investing from the "screens". A lot of VI websites and commentators, like the SerenityStocks posted, focus a lot on the adherence to whether or not a stock passes all the screens. The problem with that, of course, is that simply passing the screens doesn't tell us if the security is undervalued or simply a sinking ship that the market has accurately identified. So, the stocks given by these screens should simply serve as a starting point to dig much, much deeper.
3/30/13 12:09 PM
Ignore | Quote | Vote Down | Vote Up
Mphelan
22 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 6/10/09
Posts: 978
To expand, the following are the outlines I look at when I do equity research from a "value" perspective:

1) Define the universe. Identify an industry or investment opportunity where there may be good opportunity due to undervaluation. Alternatively, you can narrow your universe to industries you feel very knowledgeable about (this can be dangerous, because knowledge about the field does not always translate into investable knowledge about the field and can lead to hubris into evaluating the differences between the two)

2) Narrow your choices. I have some robust screens I developed on Excel, but you can play with Google Finance's sreener to get results pretty simply. Play with PE, EPS growth rate, book value, ROE, etc., until you find a set of screens that best reflects what you're looking for.
A stock does not have to pass every screen! But, for the sreens it fails there should be a compelling reason why (for instance, if you have a 10-year EPS growth screen and you're looking at a company that got hit in the downturn, you might be willing to waive that)

3) Learn everything you can about the company and its attendant industry. People, history, products, services, trends, etc. Master every bit of their financial statements for as far back as you have the patience. My most important criteria here, is "story", which I'll cover in a bit. For instance, Nokia may pass certain value screens and look to have a low valuation, but does that make it a good investment?

4) Perform an evaluation. I have five main areas I look at when I evaluate the company
a) What's the "story?" What sets this company apart? Does it have an incredible corporate culture? Does it have a monopoly in a certain sector with high barriers to entry? Does everyone have to pay it licensing fees? Is it going to spin off unprofitable units? What are the elements that give this company a sustainable edge. This becomes really important in the following parts
2) What's the "alignment"? Who owns this company and how do they influence its governance. If you're in Asia, you might want to see a family run enterprise where the CEO or chairman owns a bunch of the company and rules with a tight fist and a clear vision. You don't want to see him be 85 years old with 10 children by 4 wives and everyone's going to fight over the company when he does. Or, in China, you don't want to see an SOE where the CEO is an aparatchik with no equity stake in the company. He doesn't care to grow the company, he just wants to live luxuriously with the safety of government backing. How about the institutional ownership? Who's buying into this company. If BlackRock Global Allocation fund just bought 12%, that's of great interest. Also, if the insiders are adding a lot to their holdings (see SEC filings), they may recognize something that the market hasn't valued into the price.

c) Valuation. This is where accurate math is important, and the ability to work in fuzzy numbers even more so. Most valuations don't use complicated formulae, but accuracy of the base numbers and proper rationale for valuation method is key. Not every industry or every company will be appropriate for the same valuation. For mining companies, I like to do a weighted NAV for all mines in current operation or within two years of commencing operation with only proven and probably (no inferred) resources counted. I then compute a long-term resource price that is 10-20% lower than current spot prices and assign discount rate based the potential hiccups the project might encounter (eg, Mongolian or African projects have a higher discount than Canadian).

d) Answer the question "Why is this a value?" This is not just about the current price vs. your calculated value. Strong management with a vested interest in success? Steep competitive advantage? Trading at a very low Price-to-Book with a very good cash position and low debt? Then answer, "Why is this not a value"? Weak earnings growth? Sector decline? Management ineptitude or volatility? Regulatory pressure? Then weigh the two.

e) What's the "catalyst"? If the stock has 50% upside but nothing compelling for investors to take a look at it for,you could be sitting for a long time on that investment, racking up a lot of opportunity cost and downside risk. In the gold miner's case, I believed that once the firm showed a profit on a newly operational mine that the market would recognize that its valuation was too low.

f) Make your recommendation. "Buy" or "Sell". Have conviction about this one. "Hold" ratings don't hold water here, unless upside potential is very large and downside potential is low (betting on a Hong Kong dollar revaluation falls into this category. The government de-pegging, or widening the peg's band, is most likely to appreciate the value of the HKD. The worst that happens is that your HKD CDs return half a percent a year, which is what you'd get in the States, too)

Hope that helps some people
4/1/13 10:18 PM
Ignore | Quote | Vote Down | Vote Up
justin@gosscpa.com
10 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 2/24/03
Posts: 1532
Mphelan - Not a book, but the annual Berkshire reports are gold.

Also, if you're interested in investing, put together a stock pitch. Make it about ten minutes with a written report and an Excel model to back it up.

Then pitch it to any friends you have in finance. They will pick apart the things you're not doing right, recognize the things you are, and make note of what you're missing. Especially important is their critique of your investment theses. Having a beautifully thought out valuation that allows you to invest with a 50% margin of safety is worthless if there's not catalyst for the equity to revalue in the near enough future to make the upside worth the opportunity cost and potential for downside risk.

I am really encouraged to see a lot of people on here recommend the Value investing books. Following value investing principles is the safest way to not lose money, because even if the "undervalued" stock is not, in fact undervalued or does not get revalued, it's probably got less downside than a momentum play gone wrong.

I think the really important thing is to separate Value Investing from the "screens". A lot of VI websites and commentators, like the SerenityStocks posted, focus a lot on the adherence to whether or not a stock passes all the screens. The problem with that, of course, is that simply passing the screens doesn't tell us if the security is undervalued or simply a sinking ship that the market has accurately identified. So, the stocks given by these screens should simply serve as a starting point to dig much, much deeper.

I have to agree with Buffet's annual shareholder letters. I have every one dating back to 1974 and have read most of them.

I can't believe I've never heard of a college course specifically designed around the sage wisdom of those letters.

You can download most of the letters from the Berkshire website FOR FREE (how is that for value).
4/2/13 11:24 AM
Ignore | Quote | Vote Down | Vote Up
LeftBench
42 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 8/5/02
Posts: 9503
@ Mphelan and justin. Thanks for the posts. Will have to check out these reports and letters for sure.
4/2/13 4:34 PM
Ignore | Quote | Vote Down | Vote Up
Technofiend
Send Private Message Add Comment To Profile

Member Since: 8/24/00
Posts: 61511
An excellent value investing book I came across recently, although quite advanced, is Quantitative Value.

http://www.amazon.com/Quantitative-Value-Web-Site-Practitioners/dp/1118328078

4/28/13 5:09 PM
Ignore | Quote | Vote Down | Vote Up
NCAA92
55 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 7/21/05
Posts: 3498
Twelve Gage - 
Wes_Mantooth - 
salyer36 - Justin:

I didn't forget about you. Been busy. This links sums it up pretty good:

http://www.serenitystocks.com/criteria

Interesting link

Voted up Slayer! 

That is a pretty cool site. 

Thank you.


Very Interesting. I am having a hard time finding stocks that actually PASS according to the Graham screener. The 3 I currently hold all have a FAIL rating.
4/28/13 5:55 PM
Ignore | Quote | Vote Down | Vote Up
salyer36
11 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Edited: 04/28/13 5:57 PM
Member Since: 11/3/02
Posts: 2206
The Graham screener is more of a tool. I own several stocks that FAIL the Graham test. I use it as more of a checklist, and see if a stock meets a certain number of criteria. I don't remember how many there are, but lets say for argument sake there are 8. If a stock meets say, 6 or 7, I will considering buying it, and if it meets 8 I will strongly consider buying it. For instance, one of the criteria is that the stock pays 20 year of dividends. I wouldn't eliminate a stock just because it has only paid 19 years.

As Mphelan touched upon, even if you find a stock that meets all of the criteria, you have to figure out why it is "cheap" or undervalued. For instance, a lot of value investors were pushing one of those for profit education stocks... either Devry or Apollo Group I can't remember which one... but I wouldn't even consider buying either of them. Anyone who recently went to school will talk to you about the "student loan bubble." The reason these stocks are so cheap is because everyone recognizes this bubble and is shorting the shit out of them. So like Mphelan said, you have to figure out why they are undervalued. Once you know why, you can determine if it is only temporary (IE a knee jerk reaction to a bad quarter) or if its because of something more permanent (IE there is a market shift that will damage the company's business model).
5/2/13 10:28 PM
Ignore | Quote | Vote Down | Vote Up
BJ Penn Forever
171 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 1/1/01
Posts: 6607
later
5/10/13 10:48 AM
Ignore | Quote | Vote Down | Vote Up
LeftBench
42 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 8/5/02
Posts: 9517
Seth - 

"Automatic Millionaire."

 

It is not cheesy like the title sounds.  It covers the basics of what every person should be already doing, but the majority probably don't.  Goes over things like setting up automatic savings, making sure you are maxing out your 401k etc.  It's an easy read I suggest you pick it up.


Just finished reading this. Good read. I had already known about "paying myself first," but automating everything sure will make life much easier.

I definitely recommend this book.
5/30/13 8:45 PM
Ignore | Quote | Vote Down | Vote Up
RIPBILLHICKS
2 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 4/18/08
Posts: 184
It is best to first understand what our financial system is and how it works. Once you know the rules of the rich you can use them, if you so choose.
1)Vultures in Eagles Clothing.
2)Web of Debt
3)Creature from Jekyll Island.
4)They own it all including you.
5)Confessions of an economic hit man.

Once you realize that fiat money is debt and what you are chasing is a carrot on a stick.
There are various ways to chase the carrot.
Trading
1)Market Wizards.
2)Pit Bull.
Real Estate
Anything by Robert Kiyosaki.
Business
Millionaire Fastlane, is good one start with, easy read.
These are all easy books to begin with, none are technical.
5/30/13 9:49 PM
Ignore | Quote | Vote Down | Vote Up
myersei
8 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 4/13/12
Posts: 1023

Robert Kiyosaki may be one of the most inept financial experts I've ever read.  How the guy landed on the same stage as Trump, Guiliani, etc. is beyond me.

Skip anything he's written.  Stay away from Suze Orman too, she's no different.

5/31/13 8:47 AM
Ignore | Quote | Vote Down | Vote Up
RIPBILLHICKS
2 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 4/18/08
Posts: 186
I do not think Kiyosaki is inept at all. His advise is accurate and correct in my experience of 10 years of investing. At a talk in 2005, Kiyosaki advised the audience to stop buying real estate because the marketing was near peaking.

I sold a property shortly before the market peak, which resulted in a huge return, that property later went into foreclosure for 1/4 what I sold it for. He was the only person advising people to get out of real estate in 2005 that I was aware of. He also does a great job of explaining how central banks operate, which is the real key to long-term financial planning in my opinion.
5/31/13 8:57 AM
Ignore | Quote | Vote Down | Vote Up
RIPBILLHICKS
2 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 4/18/08
Posts: 187
Also, Al Lowry wrote some goods books on real estate in the 80s that you can buy for pennies on amazon.
5/31/13 12:08 PM
Ignore | Quote | Vote Down | Vote Up
Palmala Handerson
26 The total sum of your votes up and votes down Send Private Message Add Comment To Profile

Member Since: 8/20/02
Posts: 9758
Kiyosaki has some sound advice in his books. The problem is what he could've put in a pamphlet he spread out over about 10 books, a board game etc etc.

He teaches VERY BASIC economics but it is a good starting point and I think Rich Dad Poor Dad should be mandatory to read in high school. Just so the kids can understand that going out and getting a "job" isn't necessarily the best way to earn a living.
5/31/13 12:55 PM
Ignore | Quote | Vote Down | Vote Up
Wes_Mantooth
Send Private Message Add Comment To Profile

Member Since: 10/2/09
Posts: 11630
Palmala Handerson - Kiyosaki has some sound advice in his books. The problem is what he could've put in a pamphlet he spread out over about 10 books, a board game etc etc.

He teaches VERY BASIC economics but it is a good starting point and I think Rich Dad Poor Dad should be mandatory to read in high school. Just so the kids can understand that going out and getting a "job" isn't necessarily the best way to earn a living.

Agreed

Reply Post

You must log in to post a reply. Click here to login.