5 Must-Read Books for Value Investors....

The internet provides many lists of the books recommended for investors. This article will list books which are specially recommended for upcoming value investors.

"The Intelligent Investor" (1949) by Benjamin Graham
Authored by the Benjamin Graham, widely recognised as the father of Value Investing, this book laid the foundations for the investing practices of generations of highly successful investors. His most famous student, Warren Buffett, sings this book's praises at every opportunity, and has often said that his investing philosophy is 85% Benjamin Graham. Written in a highly engaging style, this book presents an investment philosophy that differs remarkably from the one seen and heard on business channels everyday. The concept of Mr. Market, an abstraction for the irrationalities of the market is perhaps one of its most enduring creations. Warren Buffett's testimonial for the book: "By far the best book on investing ever written."

"Security Analysis"
From Wikipedia: "Security Analysis, authored by professors Benjamin Graham and David Dodd of Columbia Business School, laid the intellectual foundation for what would later be called value investing. The work was first published in 1934, following unprecedented losses on Wall Street. In summing up lessons learned, Graham and Dodd chided Wall Street for its myopic focus on a company's reported earnings per share, and were particularly harsh on the favored "earnings trends." They encouraged investors to take an entirely different approach by gauging the rough value of the operating business that lay behind the security. Graham and Dodd enumerated multiple actual examples of the market's tendency to irrationally under-value certain out-of-favor securities. They saw this tendency as an opportunity for the savvy."

This book is often credited with creating the profession of equity research analysis, by developing a rigorous framework for analysing securities and providing guidelines for valuing undervalued securities. It transformed the much reviled profession of the stock forecaster, into the analytical profession of equity analysis, which is an integral part of the financial markets today.

"The Essays Of Warren Buffett: Lessons For Corporate America" (2001) by Warren Buffett and Lawrence Cunningham
While Warren Buffett has not himself authored any book explaining his investment style, he has been writing annual reports ever since he took over the reins of his firm - Berkshire Hathaway. In these letters he explains the rationale for his investment decisions and also gives useful insights into his views on corporate strategy, governance and various other issues related to business. These letters are freely available to the general public, and contain all of Mr. Buffett's letters written since 1977. Lawrence Cunningham has done a fantastic job of organising all these writings into a single book, and has categorised the diverse writings of Mr. Buffett into various chapters organised by subject matter.

"Rule #1", by Phil Town
This book is ideal for novice investors interested in understanding the philosophy of value investing. Some reviewers have criticised this book for making sweeping generalisations, and for trying to make investing sound like a discipline that is very easy to master. The book's contribution, however, lies in the fact that it serves as a useful stepping stone before one begins to delve deeper and deeper into the concepts and ideas underlying value investing. As a personal note, this book, which I came across while casually browsing in a bookstore, was my introduction to the field.

"Value Investing and Behavioral Finance", by Parag Parikh
Parag Parikh is a noted Indian value investor, who runs a highly successful investment advisory service. This book explains Value investing in an Indian context with numerous real-world examples. The field of Behavioral finance is intimately linked with value investing, as various behavioural biases often tend to impact investment decision making. This book serves as a very useful introduction to this emerging discipline within finance, which has been getting much higher levels of attention from investors in the wake of the recent financial crisis.

Another famous book known as "Margin of Safety", by Seth Klarman, a famous value investor, is often included in the list of most recommended books on value investing. The book is currently out of print. Such is this book's reputation, that a used copy of this book once sold for $ 700, and it routinely quotes for $ 2000 on eBay and Amazon.

- Vivek Iyer, Equity Research Analyst, HBJ Capital Services Pvt Ltd, [Vivek@hbjcapital.com]