Ravi Nagarajan's  Instablog

With the holiday season upon us, now is the perfect time to select meaningful gifts for friends, family, and colleagues.  Rather than buying gifts which are destined to gather dust or end up “re-gifted” to others, consider purchasing a great book matching the interests of the recipient.  In this first annual gift guide for value investors, ten books have been selected which are certain to captivate the attention of anyone interested in the field of investing. Some choices will be familiar while others may be unexpected.  Happy Holidays!

#1:  The Intelligent Investor

The Intelligent Investor by Benjamin Graham is perhaps the most widely cited but least followed book on investing.  Few investors on Wall Street have failed to read this classic and countless individual investors have done so as well.  Nevertheless, the vast majority have failed to absorb the lesson of “Mr. Market” that is the key to success or failure in the field of investing.  Why is this book ranked #1?  For those who have the appropriate temperament and capabilities, it serves as an outstanding introduction to the field of value investing in a format that will not intimidate those without formal training in finance.

#2:  A Random Walk Down Wall Street

Readers of The Rational Walk may wonder why Burton Malkiel’s A Random Walk Down Wall Street appears on this list.  First, Mr. Malkiel presents the argument for market efficiency in a very clear manner that is easily accessible to those new to investing.  Second, it is critical for value investors to understand the prevailing views driving the decision making process of the vast majority of investors.  While most value investors reject the notion of market efficiency, there are worse outcomes than adopting an indexing strategy of the type advocated by Mr. Malkiel (despite the poor record of indexing over the past decade).

#3:  Common Stocks and Uncommon Profits

On the cover of Common Stocks and Uncommon Profits by Philip A. Fisher appears the following quote:  “I am an eager reader of whatever Phil has to say, and I recommend him to you.  — Warren Buffett”.  What is fascinating about Mr. Buffett’s quote is that, on the surface, the investing approach described by Mr. Fisher is very different from the Graham style of value investing.  In fact, Mr. Fisher’s views are regarded as key foundations for the field of growth investing.  If that’s the case, why does Warren Buffett find the book valuable?  For a full review of this book on The Rational Walk, click on this link.

#4:  Security Analysis

Some will protest that Security Analysis by Benjamin Graham and David Dodd should rank #1 on this list.  After all, it is the undisputed Bible of value investing.  However, it is not nearly as accessible as The Intelligent Investor and I have known individuals who grow frustrated with the book, particularly some of the older editions.  While the 6th edition, reviewed in more detail on The Rational Walk earlier this year, is greatly improved with introductions and examples from contemporary investors, I still consider The Intelligent Investor to be a superior choice for those new to the concepts.  For those with more experience, Security Analysis is a better choice.

#5:  Poor Charlie’s Almanack

From first appearances, Poor Charlie’s Almanack, edited by Peter Kaufman, might appear as a book that can be read casually.  While it is true that the book is richly illustrated and produced, it would be a grave error to regard the content with any less reverence than Security Analysis or The Intelligent Investor. The great virtue of this book is the multi-disciplinary emphasis expressed in Mr. Munger’s speeches and other writings.  Those who are most likely to appreciate the message should have a grasp of basic concepts of investing.  However, anyone can benefit from the life lessons expressed in these pages.

#6:  Essays of Warren Buffett:  Lessons for Corporate America

Lawrence Cunningham has done a great service for investors everywhere by compiling information from Warren Buffett’s shareholder letters into a very accessible compilation in Essays of Warren Buffett:  Lessons For Corporate America. Why would anyone pay to read letters that can be downloaded for free on Berkshire Hathaway’s web site?  Mr. Cunningham adds a great deal of value by arranging the letters into a convenient and topical format rather than a purely chronological format.  Read this article on The Rational Walk for a full review of the book.

#7:  Snowball:  Warren Buffett and the Business of Life

Alice Schroeder was granted unprecedented access to Warren Buffett himself, his files, and his family and colleagues over a number of years and the end result was Snowball:  Warren Buffett and the Business of Life. This is not a book that outlines Mr. Buffett’s investing techniques in detail, but it is of interest to those who wish to know more about his history from a personal perspective.  To be sure, business topics are discussed, but the new insights tend to be more on the personal side.  For a full review of this book along with Roger Lowenstein’s 1995 Buffett biography The Making of an American Capitalist, please click on this link.

#8:  The Great Crash:  1929

“What has been is what will be, and what has been done is what will be done; and there is nothing new under the sun.” – Ecclesiastes 1:9.

In The Great Crash: 1929, John Kenneth Galbraith describes in excruciating detail the human follies that led to the 1929 stock market crash along with some of the well intentioned, yet futile steps taken by market participants and government officials to remedy the situation.  This book was recommended by Warren Buffett at the 2009 Berkshire Hathaway annual meeting for a very important reason.

#9:  How to Build a Business Warren Buffett Would Buy:  The R.C. Willey Story

The R.C. Willey Story, skillfully told by author Jeff Benedict, is easily the most inspiring business book I read in 2009.  Anyone who is cynical about “up from the bootstraps” American success stories should read this book about Bill Child’s life story.  It is also an excellent choice for college students and other young people who are starting a career in business.  From an investment perspective, it is hard to come away from reading the book without thinking of at least a few attributes to look for when searching for investment candidates.  For a full review, please click on this link.

#10:  Influence:  The Psychology of Persuasion

Robert B. Cialdini’s Influence:  The Psychology of Persuasion may be #10 on this list, but is critically important for anyone interested in communicating more effectively.  From an investment perspective, Mr. Cialdini will provide you with the tools to determine whether your investment advisor is manipulating you using common psychological tricks.  For example, it is hard to imagine that anyone who internalizes the techniques in this book would have fallen victim to Bernard Madoff’s scam.  It is therefore a “must read” for anyone who uses advisory services of any kind.

Bonus Selection

Few of the value investors on your shopping list will have this Samsung 50 inch Plasma television hanging in their living rooms!

From the manufacturer:  Samsung’s new PN50B650 plasma flat panel HDTV exemplifies the design and performance refinements for those with discerning tastes and a passion for innovation. Picture your favorite room filled with 50 inches of 1080p Full HD picture performance artistically accented in a new Touch of Color design.

Disclosure

OK, so you’re suspicious about that last selection, aren’t you?  In the interests of full disclosure, be aware that The Rational Walk receives a small commission from Amazon.com on each purchase made by clicking on the links in this article.  The bigger the purchase, the better the commission!  It should be noted that the customer does not pay Amazon.com any more for the product than if you directly purchase the merchandise rather than click on one of the links in this article.

Best wishes for good reading (or viewing), and Happy Holidays!