A subscriber to The Black Swan Portfolio asked me for my top 5 best investment books.
Phew — that's a tough question.
Just back from a weekend away with the in-laws, I've been able to scratch off another three from the to-read list. But which five to recommend among all these excellent books?
I know I am always really disappointed when I open articles with titles like this, or when famous investors get asked for book recommendations and they go with the The Intelligent Investor or similar value-investing classics. It's not that they aren't amazing and foundational to the genre, it's just that you are always hoping for a recommendation you haven't gotten yet.
Keeping that in mind, I've come up with five names that have been extremely important to me. It's unavoidable that many of you will be familiar with several of these, but I'm hoping there are at least one or two in there that all but the most hardcore of investors haven't read yet.
Another day, I'd likely come up with another handful. But here we go.
This book changed transformed how I think about competition and analyzing competitive landscapes. Bruce Greenwald of Columbia Business School lays out a simple but super powerful framework of how to think about businesses and the sustainability of their "competitive moats".
My copy is really yellow and it looks extremely cheesy. I think there are many serious investors who avoid having this laying around or recommending it anywhere because its title is so "self-help" like it sets off alarm bells with everyone who doesn't know Joel Greenblatt. Which is basically everyone who didn't read the book and therefore it's great practice to keep it in a drawer.
If not to keep the secret profits to yourself because chapter after chapter it is laid out how especially us individual or investors operating at modest scale can do really, really well and beat the pros.
It does require a lot of work though. If you want to avoid work; go with his book The Little Book That Beats The Market. If you like the quantitative hands-off style AND are able to keep your hands off! A great alternative is Quantitative Value by Tobias Carlisle and Wesley Gray. The formula's recommended by the latter is likely to beat the little book over the long term.
I prefer to do the work although I always take note of what the research shows about the baseline you can expect.
The Manual of Ideas has similarities to Joel Greenblatt's Genius book as it lays out nine different ways you can likely beat the market. Their reasoning is clear and they explain these avenues well. There were definitely areas I didn't think about exploring yet. The book also includes very useful and practical lists of money managers to follow to gain ideas and clear examples of investment cases where we can do the work and beat the market.
Nassim Taleb is most famous for his Black Swan bestseller and with Antifragile he excercised his option to expand on that success. But I'm so glad he did. Antifragile is a term invented by Taleb its supposed to indicate the opposite of fragile. I think this is a very interesting and new concept. What companies or securities are antifragile? What do these add to a portfolio? I'm extremely interested in the subject of how to defend against Black Swans without giving up a tremendous amount of return. I believe this book is crucial in that quest. You'll see a lot of people recommending it after the next crash, market drops tend to go fast, but I'm recommending it now. Read it before the next crash and do something with your expanded knowledge.
Michael Mauboussin has written a number of books and I recommend them all. This is one of my top three influential writers along with Taleb and Stahl. The latter has no books out or I'd recommend it as well. I've picked this one because, along with Expectations Investing, it's one of my favorites of his and it adds a bit of a mindset twist to the top five list. Mindset or psychology is another important part of anyone's long term investment success and this is a great way to get you on the path to making better decisions.
Have you been on on a very hot investing streak lately? Definitely read this. Odds will go up you'll be able to maintain it.
Investing legend Seth Klarman of The Baupost Group wrote the Margin of Safety a long time ago. It's out of print and hard to get which is why its price is rather high. Price isn't value though but there is a lot to learn from other sources before this becomes how I advocate you allocate your reading allowance. Having said that, it's a very solid book of a brilliant investor whose investment letters are very hard to obtain as well. He's one of the investors I try to emulate. The margin of safety is a central concept. It is so simple it took me a long time to understand why these investment greats like Klarman, Buffett, etc., prefer it to much more impressive DCF models etc. It's not that they can't do the models but the margin of safety works just as well or better while the chances decrease a complicated model blinds you to the irregularities of the real world.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.