[n.b.] anything bold & underlined is a link to the original source material
Below is a list of papers and books that have shaped my thinking on investing. I will continue to update this section as I come across more works. Hope it is useful
Forecasting the Future
This set of texts and books probably had the biggest effect on my approach to investing and I think firmly backups up the value investing objective of buying companies that are objectively cheap today. It is also why you will not see a huge amount of time devoted to building financial models projecting the future in my investment memos and definitely why I do not have a macro view on anything.
It all started when I came across this speech by an employee of Batterymarch Financial Management entitled “Trying Too Hard.” In it the speaker focuses on our ability to predict the future and I have included an extract here to give you a sense of the speech:
The second idea I am going to ask you to think about is that most of us spend a lot of our time doing something that human beings just don’t do very well. Predicting things. What earnings will be in a few years. When interest rates will peak. What inflation will be. One of the most consuming uses of our time, in fact, has been accumulating information to help us make forecasts of all those things we think we have to predict. Where’s the evidenced that it works? I’ve been looking for it. Really. Here are my conclusions: Confidence in a forecast rises with the amount of information that goes into it. But the accuracy of the forecast stays the same. And when it comes to forecasting—as opposed to doing something—a lot of expertise is no better than a little expertise. And may even be worse. The consolation prize is pretty consoling, actually. It’s that you can be a successful investor without being a perpetual forecaster. Not only that, I can tell you from personal experience that one of the most liberating experiences you can have is to be asked to look over your firm’s economic outlook and to say, “We don’t have one.”
Reading the speech led me to two very interesting books that are worth a read: (i) The Tao of Physics, and; (ii) The Dancing Wu Li Masters
Even more useful than the books above is getting to know the work of J. Scott Armstrong who is a Wharton School professor with a focus on forecasting. I have read a lot of his papers and also the reading lists / research he cites in each one but as a starter for five I will just draw you to the two mentioned in the original speech and let you begin your journey there
Useful Books & Good Reads
Not all of these books are specifically value investing manuals but I have found all of them useful in the round or at least a very fun read
[Gawande , Atul] The Checklist Manifesto
- An examination of the impact of checklists in real life scenarios (particularly medical / surgical). You will definitely start using them after reading this book
[Renehan, Edward] The Dark Genius of Wall Street: The Misunderstood Life of Jay Gould, King of the Robber Barrons
- I picked this up after visiting Gould’s house. It is real tour around the hectic investing times in the days of a totally unregulated market and a fantastic read.
[Einhorn, David] Fooling Some of the People All of the Time: A Long Short (and Now Complete) Story
- A good insight into a fantastic deep value investor’s investment process. Talk about a long hold against a negative feedback loop!
[Malkiel, Burton] A Random Walk Down Wall Street
- The book that popularised the Random Walk Hypothesis and is ultimately in favour of the efficient market hypothesis. Whilst I do not agree with the conclusion it is important to understand the opposite arguments to your view as well as being a good read.
[Marks, Howard] The Most Important Thing
- Howard Marks is the founder and Chairman of Oaktree Capital one of the leading distressed debt investors. If you have not read his letters you really should. This book draws together his conclusions on investing from a long career in the game.
[Fisher, Roger] Getting to Yes: Negotiating an Agreement Without Giving In
- We all have to do it in life, this book will help you.
[Rosenberg, Hilary] The Vulture Investors
- I think distressed debt investing is the purest form of value investing (forced sellers, complexity, hidden value etc.) but alas it is only really open to the big boys. This book takes you through some seminal bankruptcy cases and the key players (Wilbur Ross, Carl Ichan etc.)
[Ammann, Daniel] The King of Oil: The Secret Lives of Marc Rich
- A book about the founder of the commodity trading house that ultimately become what Glencore is today. A fugitive from America for years as a result of trading oil with Iran it is a pretty interesting read
[O’Clery, Conor] The Billionaire Who Wasn’t: How Chuck Feeney Made and Gave Away a Fortune Without Anyone Knowing
- What a guy! If you have a charitable bent this book is an extremely good guide on how to deploy it. I hope to follow in the footsteps of Chuck one day, albeit in a immeasurably smaller scale.
[Partnoy, Frank] The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals
- Financial markets and frauds go hand in hand. This books looks at a very early and interesting fraud related to the acquisitions of European matchstick monopolies using money raised in the USA.
[Burrough, Bryan] Barbarians at the Gate: The Fall of RJR Nabisco
- Amazing story about the first PE mega deal.
[Stewart, James] Den of Thieves
- An examination of the shenanigans at Drexel Burnham during the junk bond craze. Like all big scandals (Enron, Tech Bubble) a lot of the key players have gone on to become titans of industry.
[Graham, Ben] Security Analysis
- Thought I would forget?
Useful Articles & Other
Unfortunately I lost my ipad which had a couple of years of carefully selected key investing articles and has set me back badly. Below is the beginning of clawing back the key texts that really stood out to me: