I have tried to present most of the value investing concepts in a concise way but I would not be able to do justice to the wisdom of great value investors before us. I recommend you to go through the books written by investing greats like Benjamin Graham, Joel Greenblatt, Peter Lynch, Philip Fisher and David Dreman.
For the people just venturing into the field of investing, I suggest the following books:
Benjamin Graham is called the Father of Value Investing. It is totally worth reading what the master has to teach the world. The 1st edition was published in 1949 and the concepts are still valid. Guess what, he was also the mentor of Warren Buffet who has been able to apply the concepts and make tons of money for his investors and himself.
This is a quick read, written by one of the most successful hedge fund managers, Joel Greenblatt. He is the Founder and Managing Partner at Gotham Capital. He coined a word “magic formula” that can be easily used by common investors. I use this formula myself to screen the stocks for my own portfolio, and it can be applied to all markets.
Peter has been a star fund manager at Fidelity and generated super sized returns for his investors. He was one of the ‘growth investors’ i.e. someone who invested in companies growing at a fast pace. He had an eye for recognizing good growth companies when most of the market wouldn’t even know about it. Do read this book to know what he looked at, adds a lot of value to see if the new company your friend from work or college told about is worth investing.
As Benjamin Graham is known as Father of Value Investing, Philip Fisher can be named the Father of Growth Investing. He describes a ‘scuttlebutt’ method which screens the companies well from every stakeholder’s perspective – customers, employees, management, competitors etc. He says that if he buys a company, he would never sell it unless it is proven that the investment was based on wrong investment thesis i.e. if he missed some major factors that could impact company’s profits or viability itself.
For the readers who have already gone through the books suggested above, you can go through the following books for more knowledge:
This book shows how to work through the financial statements. I suggest having some basic knowledge of reading financial statements, which I believe you would have once you have gone through the Financial Analysis section on this website. The book is divided into two parts – analysis for corporate bonds and analysis for equities. Lot of investors have learnt techniques and fundamentals by reading this book. Even Warren Buffet values this book in his top three reads of all time.
This book is a gem in itself since it is one of the very books which deals with investor psychology. This book is a reminder that the market is irrational most of the times and a value investor can benefit from the inefficiencies created by investor irrationality. David is the Founder and Chairman of Dreman Value Management.