I always wondered:
“Which value investing book should I read next?“
“Is there a right order?”
And over the years, I’ve struggled to find such a roadmap…
But, I think, I’ve found one.
But first, let’s look at each book:
1. One Up On Wall Street
I first read this, in 1999.
Just a student.
And it had a great impact on me.
I was no longer scared of investing in the stock markets.
In fact, I fell in love with it. Still true today.
You see, in this book, Peter Lynch tells you how to get ideas for great stock picks.
And although the book’s message is simple…
… after all these years, I can swear with a hand on my heart:
It’s 100% accurate.
Honestly, how many things can we say that about?
So, if I had to recommend you one value investing book today, this is it.
There is something the book needs:
“How to read the numbers behind investing?”
Which, as you know, is critical.
And for that, you need the next one.
2. Financial Accounting (CBSE)
This one’s actually a textbook.
A simple one, on accounting.
I know, I know…
Sounds boring, right?
But trust me, knowing a little bit of accounting will change how you invest.
So, I suggest you download at least chapter 3 from the book (see link, in the roadmap below).
- 3.2: Accounting equation, and
- 3.3: Using debt and credit
Just go through the examples.
Because they’ll show you how one transaction affects all the financial statements.
To repeat: it’s a really simple book. So, please take some time out.
And do it…
You’ll be glad, I promise.
And with that, let’s come to the single most influential book on Value Investing:
3. The Intelligent Investor
It was 2001.
No book shops in Nagpur (where I was doing my Chartered Accountancy) had this book.
And of course, Flipkart and Amazon.in, weren’t even born.
So, I put together the little money I had… and imported this book from Amazon.
“Why are you telling me all this?”, you ask.
“What’s so special about this value investing book!?”
In the 1940s, Ben Graham was a top investor.
And he wrote a highly regarded book (see book number 8).
But it was really for the advanced students.
So, he wrote a simpler version:
The Intelligent Investor.
It deals with behavioral aspects of investing really well. Which is useful for someone new to the stock market.
In fact, Warren Buffett calls it the best book on investing ever written.
Not only that, Buffett has also written the preface. And a superb essay (my God, it’s awesome) in the appendix.
That counts for a lot…
One important point, though.
I find, sometime beginners struggle with the book.
You see, this value investing book was written a few decades ago. Hence, the language can feel old. Also, there are lots of tables with financial numbers.
So, first read the two books mentioned above. Only then pick this one.
With that, let’s move on to the next book:
4. Buffett’s Letters to Shareholders
Berkshire Hathaway is Warren Buffett’s life’s work.
And, since the 1970s, he has written letters to the shareholders.
If Ben Graham’s value investing books started it all, Warren Buffett took it to the next level.
Plus, as you probably know, Buffett’s letters have a cult-following in value investing circles.
So get these letters.
However, if you want a topic-wise (and not year-wise) compilation, there’s also Lawrence Cunningham’s book, Essays of Warren Buffett.
You’ll find links to both, in the roadmap, at the end of this article.
5. The Snowball
For 5 years, Alice Schroeder, had access to Warren Buffett.
And his office papers.
That makes The Snowball, his only authorized biography.
It’s a big deal.
Because, as you know, there is a cottage industry of Value Investing books on the Oracle of Omaha.
So, it’s tough to add anything new.
But, because she spoke to him at length, Schroeder gives you lots of new details and useful quotes from Warren Buffett, on the art of value investing.
The author had plans to write another book on the investing legend’s techniques.
But she fell out of his favor, because of things she said in the book.
So, we’ll never see that book… sigh :(
But you can still get The Snowball!
6. Common Stocks and Uncommon Profits
You see, Ben Graham’s approach to investing was quantitative.
But, there is another side to picking stocks.
Phil Fisher gives a detailed approach to high-quality companies.
When Warren Buffett read this book, he sought Fisher out.
And went to meet him.
In fact, take a look at the picture above. See the book cover? You’ll notice what the world’s greatest value investor has to say about Fisher.
7. Of Permanent Value
Some asked Charlie Munger, who’s Warren Buffett’s greatest fan?
He replied, “Andy Kilpatrick.”
Kilpatrick’s book – Of Permanent Value – is the big daddy of all Buffett biographies.
In fact, the latest edition, which will be released on Feb 20, 2020 is…
Wait for it…
1,340 pages long!
But the previous editions have been a lot of fun :)
And no collection of value investing books is complete without at least one.
And now, the king of them all:
8. Security Analysis
In early 1930s, Ben Graham ran a hedge fund.
And he taught at the Columbia Business School. David Dodd, who also taught there, took notes of the lectures.
That became Security Analysis.
In fact, Warren Buffett was a student of Ben Graham’s, at Columbia.
And which book was taught in class?
Important: The book comes in 6 editions. 1, 2, 3 and 6 are great, since it has the original voice of Graham. 4 and 5 are crap. They were spoiled by other co-authors.
Which edition should you buy?
Buy the 6th (latest) edition.
Because, you’ll get the 2nd (year 1940) edition in a CD. Plus, you’ll get some nice additional commentary.
9. Buffett’s Letters to Partners
Did you know?
Buffett did not start out as a long-term, high-quality-only, sort of investor.
In fact, he began with dirt cheap stocks.
Even if they were of poor quality.
Credit: Ben Graham.
If you want to understand how Buffett went about buying dirt cheap stocks and made very high returns, you have to read his early letters to partners.
Copies of these letters floated around on the internet (I’ve linked to one such, in the roadmap below).
But, you can now find them in a nice package in Jeremy Miller’s book, Warren Buffett’s Ground Rules.
And speaking of how the Oracle of Omaha started out:
10. You Can Be a Stock Market Genius
Both – Ben Graham and Warren Buffett – used to do something in their early partnerships, few investors know about.
They didn’t just buy stocks for the long-term.
They also did short-term investing.
Special situations, to be exact…
…stock picks involving corporate actions.
There are very few good value investing books on this topic.
But Joel Greenblatt’s book is the rare one, on investing in special situations.
Warning: This is strictly for advanced value investors. Not for beginners.
Here’s another interesting thought:
In my humble opinion, there are only 2 modern value investors whose books hold a candle to the high standards of Graham, Buffett and Munger.
Greenblatt is one. The other is Peter Lynch (see book number 1).
The others are just gyaan, and can actually take you into all sorts of weird directions.
Still there with me?
And now for the last one:
11. Financial Statement Analysis and Security Valuation
Have you ever asked:
“How should I value companies?”
You see, B-Schools teach you things like relative valuation. And discounted cash flow analysis.
But are these methods any good?
Do they work?
Is there anything better?
As you know, I am in the same journey, as you are…
So, I looked. And I looked.
The final stop for all valuation methods – and hence, the last value investing book in this list – is Stephen Penman.
Now, he is an amazing scholar, and a great teacher. But fair warning: it’s not for the faint of heart.
Although, if you go through it, you’ll never look at a balance sheet, with the same eyes again.
I promise you.
Value Investing Books: A Roadmap
Here then, is your roadmap for reading value investing books.
Step by step:
Level 1. Beginners
Level 2. Intermediate
4. Letters to Shareholders, by Warren Buffett ( Original | Flipkart | Amazon )
5. The Snowball, by Alice Schroeder ( Flipkart | Amazon )
6. Common Stocks and Uncommon Profits, by Philip Fisher ( Flipkart | Amazon )
7. Of Permanent Value, by Andrew Kilpatrick ( Amazon )
Level 3. Advanced
8. Security Analysis, by Ben Graham ( Flipkart | Amazon )
9. Letters to Partners, by Warren Buffett ( Original | Flipkart | Amazon )
10. You Can Be a Stock Market Genius, by Joel Greenblatt ( Flipkart | Amazon )
11. Financial Statement Analysis and Security Valuation, by Stephen Penman ( Flipkart | Amazon )
Note: I don’t make any money from the links to the books. They are there, for your convenience.
And now, over to you:
Which value investing book you love, have I missed? And, which book will you read next?