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The Journey to Increasing Investment Acumen & Book Recommendations (Part 3)

 Selected Book Recommendations

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Revised and Updated) by Burton G. Malkiel

If the reader is very new to investing, then this is a great book.  This book not only introduces the reader to investment lingo, but also surveys the many different styles and approaches to investing.  Malkiel explains the various investment approaches and points out potential weaknesses.  In the process, he manages to provide a brief history of investment management.  Nevertheless, the book is focused on the random walk theory and spends a fair amount of time trying to discredit those investors that try to actively beat the stock market on a regular basis.  It is important for the reader, to remember that these are the opinions of one person and not necessarily fact.  There are investors who have beaten the market in the past and continue to do so.  The only warning we have, is that such a book if taken as law could discourage new investors from learning more and seeing the holes in Malkiel's main argument.  Yet, the book is very good for those readers with very little previous investment knowledge.

Why Stocks Go Up (and Down) by William Pike

This book is geared to the individual that does not know much about business and accounting.  After reading this book, an individual who has never read a company's financial statements will be able to have a basic to intermediate understanding of a company's financial results.  Pike does an excellent job of illustrating how business decisions will have an impact on a company's financial results - perfect for beginners.  Whether the new investor's strategy is fundamental or technical based, this book can only help them understand business and changes that occur to a company's financial results.  Furthermore, the book explains the actual process that occurs when an individual places a trade, which many books never touch upon.  We believe that correctly understanding market mechanics are extremely important for successful investing and its a shame that the topic does not receive more coverage in investing books.

Value Investing: From Graham to Buffett and Beyond (Wiley Finance) by Bruce Greenwald

For readers with some knowledge of investing and accounting that are looking to learn more about value investing, this is a very good book.  Greenwald describes in detail the methods he uses to apply the value investing philosophy to picking stocks.  Moreover, he uses several examples to demonstrate to the reader the application of his methods.  This book preaches conservatism when evaluating stocks and making assumptions about a company's future operations.  Such a book is a must read for any body seriously considering using a fundamental and value approach.

Quality of Earnings by Thornton O'glove

This book highlights the profitable insights that the average investor can derive from reviewing a company’s publicly-disclosed financial statements like the 10-K, an annual filing, and the 10-Q, a quarterly filing.  The book focuses primarily on the analysis of the 10-K and 10-Q.  While reviewing a company’s financial statements is only one perspective of investment research, these filings are loaded with useful information that can help one understand a company’s potential of increasing/decreasing earnings in the future.  O’glove introduces the novice and reminds the professional investor of the value that can be found in these filings.  The writing and the examples throughout the book are very clear and easy for most readers to follow.  Readers with little accounting knowledge will be able to follow most of O’glove’s writing.  Also, the author briefly describes the conflicts within the investment management industry that exist and adversely affect investment advice and performance.  While the book tends to focus on spotting and avoiding troubled companies, the discussed techniques and analysis can be used by investors to find potentially strong investments. Even though the book was written in the 1980s and some of the companies used as examples may be unfamiliar to younger investors, most of the tools and analysis are timeless.

Check back, part four will be released on August 23, 2010.