Top20 Books

Some of my favourite books. More will be added as this was a particularly difficult choice of top 20.

top20 Books

In this collection of the top 20 investing books, I tried to collate a group of books which someone new to investing could pick up and piece together the main tricks of the trade. They aren’t a group of books to take on a desert island and aren’t even my favourite 20 investing books, but they are hopefully a useful cross section and you can pick up a few you haven’t read. Hint – there are more than 20 and it’s random order!

1 Smart money

The Smart Money Method

By Stephen Clapham

Description & Steve’s take

In The Smart Money Method, the stock-picking techniques used by top industry professionals are laid bare for investors. This is the inside track on how top hedge funds pick stocks and build portfolios to make outsize returns. Stephen Clapham is a retired hedge fund partner who now trains stock analysts at some of the world’s largest and most successful institutional investors. He explains step-by-step his research process for picking stocks and testing their market-beating potential. His methodology provides the tools and techniques to research new stock ideas, as well as maintain and eventually sell an investment. From testing your thesis and making investment decisions, to managing your portfolio and deciding when to buy and sell, The Smart Money Method covers everything you need to know to avoid common pitfalls and invest with confidence. Throughout, there are real-life investing examples and war stories from a 25-year career in stock markets. The message is clear – you can beat the market. To do so, you need to learn and apply the insider secrets contained within this book.

Honestly, this is a great book for serious private investors who want to up their game and pick some of the most useful techniques for their approach from the comprehensive methodology employed by me when I was working at two multi-billion hedge funds.

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Capital Returns

By Edward Chancellor

Description & Steve’s take

We live in an age of serial asset bubbles and spectacular busts. Economists argue that bubbles can only be spotted after they burst and that market moves are unpredictable. Yet Marathon Asset Management, a London-based investment firm managing over $50 billion of assets has developed a relatively simple method for identifying and potentially avoiding them: follow the money, or rather the trail of investment. Bubbles whether they affect a whole economy or merely a single industry, tend to attract a splurge of capital spending. Excessive investment drives down returns and leads inexorably to a bust. This was the case with both the technology bubble at the turn of the century and the US housing bubble which followed shortly after. More recently, vast sums have been invested in mining and energy. From an investor’s perspective, the trick is to avoid investing in sectors, or markets, where investment spending is unduly elevated and competition is fierce, and to put one’s money to work where capital expenditure is depressed, competitive conditions are more favourable and, as a result, prospective investment returns are higher. This capital cycle strategy encourages investors to eschew the simple ‘growth’ and ‘value’ dichotomy and identify firms that can deliver superior returns either because capital has been taken out of an industry, or because the business has strong barriers to entry (what Warren Buffett refers to as a ‘moat’). Capital Returns is a comprehensive introduction to the theory and practical implementation of the capital cycle approach to investment. Edited and with an introduction by Edward Chancellor, the book brings together 60 of the most insightful reports written between 2002 and 2014 by Marathon portfolio managers. This book will be a welcome reference for serious investors who looking to maximise portfolio returns over the long run.

I prefer the original book, Capital Account, but it’s out of print and extremely expensive. This is a close runner-up. The capital cycle is a genius idea which will become even more relevant in the coming decade. See also my Podcast Episode 9 with Jeremy Hosking, a co-author.

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Reminiscences of a Stock Operator

By Edwin LeFèvre

Description & Steve’s take

Fictionalized account of the life of the securities trader Jesse Livermore. Despite the book’s age, it continues to offer insights into the art of trading and speculation. In Jack Schwager’s Market Wizards, many of the traders interviewed considered Reminiscences a major source of stock trading information for both experienced and new traders.  The book tells the story of Livermore’s progression from day trading in the then so-called “New England bucket shops,” to market speculator, market maker, and market manipulator, and finally to Wall Street where he made and lost his fortune several times over. Along the way, Livermore learns many lessons, which he happily shares with the reader.

To learn about the stock market, you have to lose money. This book is the next best thing. Full of memorable quotes, you can feel the pressure.

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The Most Important Thing

By Howard Marks

Description & Steve’s take

Legendary investor Howard Marks is chairman and co-founder of Oaktree Capital Management, which has $100 billion under management. He is sought out by the world’s leading value investors and his client memos brim with insightful commentary and a time-tested, fundamental philosophy. Now for the first time, readers can benefit from Mark’s wisdom, concentrated into a single lifetime of experience and study, The Most Important Thing explains the keys to successful investment and the pitfalls that can destroy capital or ruin a career. Utilising passages from his memos to illustrate his ideas, Marks teaches by example, detailing the development of an investment philosophy that fully acknowledges the complexities of investing and the perils of the financial world. Brilliantly applying insight to today’s volatile markets, Marks offers a volume that is part memoir, part creed, with a number of broad takeaways.

I think this may be the best investing book ever written. Marks is a genius communicator and if you could implement all he explains, you would certainly be a much better investor.

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You Can Be a Stock Market Genius

By Joel Greenblatt

Description & Steve’s take

A comprehensive and practical guide to the stock market from a successful fund manager—filled with case studies, important background information, and all the tools you’ll need to become a stock market genius. Fund manager Joel Greenblatt has been beating the Dow (with returns of 50 percent a year) for more than a decade. And now, in this highly accessible guide, he’s going to show you how to do it, too. You’re about to discover investment opportunities that portfolio managers, business-school professors, and top investment experts regularly miss—uncharted areas where the individual investor has a huge advantage over the Wall Street wizards. Here is your personal treasure map to special situations in which big profits are possible, including Spin-offs, Restructurings, Merger Securities, Rights Offerings, Recapitalizations, Bankruptcies and Risk Arbitrage.

Joel Greenblatt is one of the world’s top investors. Like many of them, he is also a superb communicator. You can read any of his books and you cannot fail to learn.  

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The Essays of Warren Buffett

By Lawrence A Cunningham

Description & Steve’s take

When Warren Buffett speaks, people worldwide listen. And with good reason: Buffett is the most successful investor-manager in history. He has set world records for achieving both high personal net worth, exceeding US$80 billion, and high corporate value for his holding company, Berkshire Hathaway, approaching US$600 billion. Time magazine lists Buffett as among the most influential people in the world—and he is. According to Buffett, the best book collating his philosophy is The Essays of Warren Buffett by Lawrence A. Cunningham, the internationally renowned scholar and expert on Buffett and Berkshire. Through many updated editions dating to 1997, The Essays is the definitive account of Buffett’s approach to investing and management, consisting of a carefully curated and thematically organized compendium of Buffett’s original annual letters, along with Cunningham’s priceless commentaries.

Other than reading every one of Buffett’s letters, this is the best way of learning from Buffett’s wisdom. It’s shorter and more enjoyable too. Highly recommended.

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Quality Investing

By Lawrence A Cunningham

Description & Steve’s take

The concept of quality is familiar. People make judgments about it every day. Yet articulating a clear definition of quality is challenging. The best companies often appear to be characterized by an ineffable something, much like that of people who seem graced by a lucky gene. Think about those of your peers who seem a lot like you but somehow always catch a break. They are not obviously smarter, smoother, richer, or better-looking than you, yet they are admitted to their university of choice, get their dream job, and earn considerable wealth. Try to discern what they have that you don’t, and you are stumped. Chalk it up to fate or plain dumb luck. Businesses can be similar. For reasons that are not always evident, some end up doing the right things with better results than average. They may not appear to be savvier acquirers, more adept marketers, or bolder pioneers, yet they integrate new businesses better, launch products more successfully, and open new markets with fewer mishaps. Perhaps through some combination of vision, scale, or business philosophy, these companies uncannily come out ahead. In our view, three characteristics indicate quality. These are strong, predictable cash generation; sustainably high returns on capital; and attractive growth opportunities.

This is another investing book written with input from one of the best hedge fund managers and by one of the best investment writers. It has simple concepts, tested in practice and is simply outstanding.

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Fooled By Randomness: The Hidden Role Of Chance In Life And In The Markets

By Nassim Nicholas Taleb

Description & Steve’s take

Everyone wants to succeed in life. But what causes some of us to be more successful than others? Is it really down to skill and strategy; or something altogether more unpredictable? This book is the word-of-mouth sensation that will change the way you think about business and the world. It is all about luck: more precisely, how we perceive luck in our personal and professional experiences. Nowhere is this more obvious than in the markets we hear an entrepreneur has vision or a trader is talented, but all too often their performance is down to chance rather than skill. It is only because we fail to understand probability that we continue to believe events are non-random, finding reasons where none exist. This irreverent bestseller has shattered the illusions of people around the world by teaching them how to recognize randomness. Now it can do the same for you.

Never confuse genius and a bull market. This book alerts you to the tail risks and we have had a lot of those in the last 20 years, so this is compulsory reading for all equity investors.

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Common Stocks and Uncommon Profits

By Philip Fisher

Description & Steve’s take

Widely respected and admired, Philip Fisher is among the most influential investors of all time. His investment philosophies, introduced almost forty years ago, are not only studied and applied by today’s financiers and investors, but are also regarded by many as gospel. This book is invaluable reading and has been since it was first published in 1958. The updated paperback retains the investment wisdom of the original edition and includes the perspectives of the author’s son Ken Fisher, an investment guru in his own right in an expanded preface and introduction.

If Warren Buffett can learn from him, you can too. Although this is an old book, it reminds you that nothing really changes in markets – Zoom today is a mirror of Texas Instruments in Fisher’s era. And he has some amazing advice on how to research stocks. This is a must read for any serious equity invetsor.

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The Money Game

By Adam Smith

Description & Steve’s take

This essential book takes readers to the Street to learn about the intricacies of money and how the stock market impacts every area of our lives. According to the author, the key to making wise, lucrative investments is knowing ourselves. In witty, easily accessible language, he shares pithy insights about the role of intuition and the psychology of guilt, arguing that there is no substitute for information. Smith’s Irregular Rules shatter common myths and misconceptions, revealing why nothing works all the time and illustrating how greed and fear fuel the market. Readers will learn about the safest types of investing, the key to following market trends, and how to capitalize growth, gleaning tips on stock movers, winners and losers, and much more. Peppered with entertaining and prescient anecdotes, The Money Game analyzes who makes the really big money and explores the meaning of our desire to become rich. From selling short and buying long to Wall Street’s crowd mentality, from what constitutes a random walk to why timing is everything, this is the definitive portrait of the Street, then and now.

Another oldie, this is one of the best books written about stockmarket investing, with great anecdotes. My favourite is Chapter 12 which I have read countless times, about how older investors often miss out on fads and speculative bubbles.

11 INvesting vs teh tide

Investing Against the Tide

By Anthony Bolton

Description & Steve’s take

Anthony Bolton, the UK’s most successful stock market investor, tells the story of his contrarian approach to managing money. He provides invaluable lessons on the factors that really matter in picking a stock: the need to identify good managers, how to run a portfolio, the importance of value investing, reading charts and how to trade successfully.

I complained to Bolton that his book weas really expensive on a per page basis but it’s absolutely worth every penny. Bolton explains some of the techniques which made him a hugely successful investor and one of the best stockpickers around.

12 manias

Manias, Panics, and Crashes: A History of Financial Crises

By Charles P. Kindleberger

Description & Steve’s take

This is a scholarly and entertaining account of the way that mismanagement of money and credit has led to financial explosions over the centuries. Covering such topics as the history and anatomy of crises, speculative manias, and the lender of last resort, this book has been hailed as “a true classic…both timely and timeless”.

Classic on bubbles. There are several similar books on the madness of corowds and I could have picked any but be sure to read at least one. It’s only with hindsight that bubbles seem so obvious, so you need to be prepared beforehand.

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100 Baggers

By Christopher Mayer

Description & Steve’s take

This book is about 100-baggers. These are stocks that return $100 for every $1 invested. That means a $10,000 investment turns into $1 million. Chris Mayer can help you find them. It sounds like an outrageous quest with a wildly improbable chance of success. But when Mayer studied 100-baggers of the past, definite patterns emerged. In 100-Baggers, you will learn the key characteristics of 100-baggers why anybody can do this. It is truly an everyman s approach. You don t need an MBA or a finance degree. Some basic financial concepts are all you need a number of crutches or techniques that can help you get more out of your stocks and investing. The emphasis is always on the practical, so there are many stories and anecdotes to help illustrate important points. You should read this book if you want to get more out of your stocks. Even if you never get a 100-bagger, this book will help you turn up big winners and keep you away from losers and sleepy stocks that go nowhere.

A brilliant book and I think too few investors understand that all the money in the markets is made by the few big winners. You only need one 100-bagger to make your portfolio highly successful and this book explains how to find them and more important, why you should hold on to them.

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Thinking Fast and Slow

By Daniel Kahneman

Description & Steve’s take

Why is there more chance we’ll believe something if it’s in a bold type face? Why are judges more likely to deny parole before lunch? Why do we assume a good-looking person will be more competent? The answer lies in the two ways we make choices: fast, intuitive thinking, and slow, rational thinking. This book reveals how our minds are tripped up by error and prejudice (even when we think we are being logical), and gives you practical techniques for slower, smarter thinking. It will enable to you make better decisions at work, at home, and in everything you do.

The most important key to investment success is managing your emotions. That’s why this book is such essential reading. There are several behavioural books in my top 20, but this is where I would start.

Description & Steve’s take

A powerful argument for how to succeed in any field: develop broad interests and skills while everyone around you is rushing to specialize. From the ‘10,000 hours rule’ to the power of Tiger parenting, we have been taught that success in any field requires early specialization and many hours of deliberate practice. And, worse, that if you dabble or delay, you’ll never catch up with those who got a head start. This is completely wrong. In this landmark book, David Epstein shows you that the way to succeed is by sampling widely, gaining a breadth of experiences, taking detours, experimenting relentlessly, juggling many interests – in other words, by developing range. Studying the world’s most successful athletes, artists, musicians, inventors and scientists, Epstein demonstrates why in most fields – especially those that are complex and unpredictable – generalists, not specialists are primed to excel. No matter what you do, where you are in life, whether you are a teacher, student, scientist, business analyst, parent, job hunter, retiree, you will see the world differently after you’ve read Range. You’ll understand better how we solve problems, how we learn and how we succeed. You’ll see why failing a test is the best way to learn and why frequent quitters end up with the most fulfilling careers. As experts silo themselves further while computers master more of the skills once reserved for highly focused humans, Range shows how people who think broadly and embrace diverse experiences and perspectives will increasingly thrive and why spreading your knowledge across multiple domains is the key to your success, and how to achieve it.

Becoming a skilled investor involves understanding yourself and improving your skills. I found this book incredibly insightful in explaining how to develop skills.

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The Intelligent Investor

By Graham & Dodd

Description & Steve’s take

The greatest investment advisor of the twentieth century, Benjamin Graham, taught and inspired people worldwide. Graham’s philosophy of “value investing” — which shields investors from substantial error and teaches them to develop long-term strategies — has made The Intelligent Investor the stock market bible ever since its original publication in 1949. Over the years, market developments have proven the wisdom of Graham’s strategies. While preserving the integrity of Graham’s original text, this revised edition includes updated commentary by noted financial journalist Jason Zweig, whose perspective incorporates the realities of today’s market, draws parallels between Graham’s examples and today’s financial headlines, and gives readers a more thorough understanding of how to apply Graham’s principles.

I didn’t buy this book until 2006 and I remember reading it on holiday in Spain. More accessible than Security Analysis and full of sensible advice for the analyst or investor.

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The Psychology of Money

By Morgan Housel

Description & Steve’s take

Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people. Money―investing, personal finance, and business decisions―is typically taught as a math-based field, where data and formulas tell us exactly what to do. But in the real world people don’t make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together.Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important topics.

Simply stunning – I read this book in one sitting and then wanted to read it again. It was that enjoyable. It won’t necessarily improve your equity investing skills, but it may make you think slightly differently both about your own personal finances and about life.

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10½ Lessons from Experience: Perspectives on Fund Management

By Paul Marshall

Description & Steve’s take

In 10½ Lessons from Experience, Paul Marshall distils the experience of 35 years of investing, including over 20 years at Marshall Wace, the global equity hedge fund partnership. He describes the disconnect between academic theory and market practice, in particular the reality and persistence of ‘skill’ – the continuing ability of the best practitioners to beat the market. But he also underscores the prevalence of uncertainty and human fallibility, showing how a successful investment management business must steer a path which recognises both the persistence of skill and the pitfalls of cognitive bias, human fallibility and hubris.

A truly exceptional book, and one which every professional investor must read. Obviously Marshall (with partner Ian Wace) has built one of the biggest hedge funds in the world, and his tips for investing success carry that pedigree easily. The book is also well written and his erudition is on display. Highly recommended.

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The Art of Thinking Clearly

By Rolf Dobelli

Description & Steve’s take

Have you ever… Invested time in something that, with hindsight, just wasn’t worth it? Overpaid in an Ebay auction? Continued doing something you knew was bad for you? Backed the wrong horse? This is essential reading for anyone with important decisions to make. It reveals, in 100 short chapters, the most common errors of judgement, and how to avoid them. Simple, clear and always surprising, this indispensable book will change the way you think and transform your decision-making – at work, at home, every day.

For me this is the bible on behavioural biases. You will recognise the mistakes you often make, although consciousness is only the first step towards improvement and it takes significant deliberate practice to reduce your behavioural errors. But this is a delightful book in which the errors are well explained and simply illustrated. Masterful.

20 anatomy of the bear

Anatomy of the Bear: Lessons from Wall Street’s 4 Great Market Bottoms

By Russell Napier

Description & Steve’s take

How does one spot the bottom of a bear market? What brings a bear to its end? There are few more important questions to be answered in modern finance. Financial market history is a guide to understanding the future. Looking at the four occasions when US equities were particularly cheap – 1921, 1932, 1949 and 1982 – Russell Napier sets out to answer these questions by analysing every article in the Wall Street Journal from either side of the market bottom. In the 70,000 articles he examines, one begins to understand the features which indicate that a great buying opportunity is emerging. By looking at how markets really did work in these bear-market bottoms, rather than theorising how they should work, Napier offers investors a financial field guide to making the best provisions for the future.

This is a famous book, rightly so, and its author is similarly well-known. Russell is one of the cleverest people in finance and I never fail to learn something when talking to him. I would have added his book on the Asian Financial Crisis to the list if I had room. Russell enables you to live through the moment and understand what was going in the minds of investors at the time – that’s invaluable teaching.

21 Outsiders

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success

By William Thorndike

Description & Steve’s take

Charlie Munger said “A book that details the extraordinary success of CEOs who took a radically different approach to corporate management.” If you need more, Thorndike brings to bear the analytical wisdom of a successful career in investing, closely evaluating the performance of companies and their leaders. You will meet eight individualistic CEOs whose firms’ average returns outperformed the S&P 500 by a factor of twenty—in other words, an investment of $10,000 with each of these CEOs, on average, would have been worth over $1.5 million twenty-five years later. In The Outsiders, you’ll learn the traits and methods—striking for their consistency and relentless rationality—that helped these unique leaders achieve such exceptional performance. Humble, unassuming, and often frugal, these “outsiders” shunned Wall Street and the press, and shied away from the hottest new management trends. Instead, they shared specific traits that put them and the companies they led on winning trajectories: a laser-sharp focus on per share value as opposed to earnings or sales growth; an exceptional talent for allocating capital and human resources; and the belief that cash flow, not reported earnings, determines a company’s long-term value.

An exceptional book, which distils corproate success down to the fundamental practice of capital allocation. These 8 leaders understood , long before it was fashionable, that buying back stock at a discount to intrinsic value was the best thing they could do for their shareholders. Now you don’t need to read the book, but you will enjoy it for sure.

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One Up On Wall Street: How To Use What You Already Know To Make Money In The Market

By Peter Lynch

Description & Steve’s take

America’s most successful money manager tells how average investors can beat the pros by using what they know. According to Lynch, investment opportunities are everywhere. From the supermarket to the workplace, we encounter products and services all day long. By paying attention to the best ones, we can find companies in which to invest before the professional analysts discover them. When investors get in early, they can find the “tenbaggers,” the stocks that appreciate tenfold from the initial investment. A few tenbaggers will turn an average stock portfolio into a star performer. Lynch offers easy-to-follow advice for sorting out the long shots from the no-shots by reviewing a company’s financial statements and knowing which numbers really count. He offers guidelines for investing in cyclical, turnaround, and fast-growing companies. As long as you invest for the long term, Lynch says, your portfolio can reward you.

It’s one of the biggest selling investing books for good reason. Lynch took the Magellan fund through the $1bnn AUM mark in the 1980s – that was huge then. Times have changed, but the advice is still amazingly current. A genius book, for new and experienced investors.

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