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Let’s take a look at the top 5 books on value investing. Value investing has become increasingly more popular as investors have access to more information than ever before. And we can also take an example from some very successful value investors such as Warren Buffet or Peter Lynch.
Before we get into the list of 5 books on value investing let me share my personal opinion. The best value investors have been practicing their skills and honing their knowledge for years. It would be very naive to think that we can achieve the same level of competence and success as them after reading a list of books.
Having said that, we all need to start somewhere, and these books are very insightful and some of them are written by successful value investors or recommended by the likes of Warren Buffet. So, arm yourself with patience, take your time to understand the concepts and the industry jargon, and if necessary, re-read multiple times.
No1 – The Intelligent Investor
This book was written by Benjamin Graham, who also happened to be a mentor of Warren Buffet at Columbia Business School. It is not so surprising then that Warren Buffett recommended this book in Berkshire Hathaway letters to investors in 2011 and 2013.
The first edition of the book was published in 1949, and I consider it to be part of the genesis of value investing. The book was revised in modern times with commentary by financial journalist Jason Zweig and a preface and appendix by Warren Buffett.
The work explains the foundations and was among the first books on value investing to shed light on key concepts. If you are not a seasoned investor, you may find some of the terminology complicated. However, there are plenty of online financial dictionaries that can clarify any doubts when it comes to vocabulary.
The Intelligent Investor describes Benjamin Graham’s principles of value investing. While stock market events and performance have proven that Graham’s strategy is still relevant and capable of producing higher than average returns.
No2 – One Up on Wall Street
Second on the list of books on value investing, is One Up on Wall Street by renowned value investor Peter Lynch. Lynch was the CEO of Magellan Fund for 13 years and took the AUM from $18 million to $14 billion over that time. He is often referred to as the Canadian Warren Buffett.
Lynch guides the reader into understanding the advantages a private investor has over professional investors. Looking at services and products that we see every day and finding the best ones can allow you to invest in promising companies before professionals do.
He makes a very clear statement, which is echoed by many in value investing, that you should only invest in companies whose businesses you understand. Which may sound like a restriction, but if you don’t understand the company’s business how can you evaluate its current value and its prospects for growth?
No3 The Financial Times Guide to Value Investing
The above title takes the 3rd spot of books on value investing. And it was originally published with the title Valuegrowth Investing and has been fully revised and updated throughout. Written by Glen Arnold who is a retired professor of investment at the University of Salford, UK with a PhD. in Economics.
Glen Arnold spent many years as an academic studying the investment performance of the best investors in the stock market. As we often hear, it’s impossible to beat the market, or even a chimpanzee has the same chance of picking a portfolio that outperforms.
However, Arnold realized that some investors were able to produce outstanding returns consistently over decades. So, he decided to set out to discover what was behind their achievements. In this book, he explains why the likes of Warren Buffet or Peter Lynch achieve such high success rates.
He explains how ordinary investors should focus on the analysis of key investment factors and provides tools to achieve that aim. He sets out the investment principles that are paramount to successful investing. And allows investors to identify assets selling at a discount to their intrinsic value.
No4 – Warren Buffett Accounting Book
The Warren Buffett Accounting Book is from 2014, by authors Preston Pysh and Stig Brodersen. Pysh is co-founder of the Pylon Holding Company, as well as the author of several investing books. Brodersen is an investment contributor to Yahoo Finance and the owner of Stig Brodersen Holdings.
The book is the second volume in a series of three books that investigate Warren Buffetts’ investment style. Brodersen and Pysh share their insights on value investing through the observations of one of the world’s best-known investors.
Within the book you will learn:
- What a discount rate is and how it works
- Two methods for calculating the intrinsic value of a company
- How to calculate important ratios to properly value any business
- Detailed instructions on how to read income statements, balance sheets, and cash flow statements
The book takes a mathematical approach to stock selection with the criteria of value investing in mind. Adding numbers to their full evaluation allows investors more objectivity when choosing where to invest their money.
No5 – Modern Value Investing
When compiling this list of Top 5 books on value investing, I was automatically driven towards the books I had read in the past and that I have had conversations about with fellow investors. But more recently I came across the above title by Sven Carlin which was published in 2018.
Although Carlin does not have the type of pedigree the other authors mentioned above can claim, but he does have a PhD. in Finance and runs the Stock Market Research Platform. More importantly, he has written a book that is compelling with a useful hands-on approach to value investing.
The book is split into four parts:
Part 1 – Discusses the psychology behind being a successful investor.
Part 2 – Here Carlin gives us 25 tools that will help us implement an investment analysis.
Part 3 – On case example applying the tools mentioned above.
Part 4 – Reflections on modern investing and the current approaches to portfolio creation. You get a range of strategies from an all-weather portfolio strategy to hyperbolic discounting as well as others.
Picking your own stocks and creating a long-term growth portfolio is no easy business and should not be looked upon lightly. Investors need to get a sound understanding of the stock market, economic cycles, and comprehension of risk when constructing a portfolio on their own.
Many investors simply don’t have the time to pick and choose, maintain and service a widely diverse portfolio of assets. This is where funds and managers come into the picture. You could also split your portfolio allocations among various types of assets by choosing among specialists in each asset class. A diversified portfolio might hold all or any of the following securities:
Hiring experts in each field can be a way of avoiding the burden of selection and knowledge needed to navigate each of these markets. However, if you are looking to create your own stock portfolio, various companies provide their services to help investors make the best choices possible. You can read our reviews of the top 6 investment newsletters here.