Forum Archive Index - May 2001

["Brian Brakenridge" <brianbrak@xtra.co.nz>]

Gerry and others:

 

My interest is in "business investing" and not "stock market investing" so my reading recommendations contain nothing pertaining to mechanical / technical / trading methodology.

 

Firstly, a wonderful quote from Charlie Munger: "opportunity comes to the prepared mind." I believe this is hugely relevant when considering your investment approach. The more you read and study the philosophies of the masters the better prepared you are to make informed decisions and take calculated risk.

 

Another quote which I've used ad nauseam is from Sir John Templeton "I don't understand why people don't study success, I suspect there are two reasons; the first is stupidity and the second is ego". It makes so much darn sense to question what the principles and philosophies are of the most successful investors. This is what I have tried to do, and again, as I have stated before, it is incredibly enlightening how many common themes you discover, but more importantly, how wonderfully simple these philosophies are.

 

The first investment book I read from cover to cover (and enjoyed) was "The Motley Fool's Investment Guide" by David and Tom Gardner. In this book I was introduced to names like Ben Graham, Philip Fisher, Warren Buffett and Charlie Munger. So I started reading more about these guys.

 

Ben Graham wrote what is the classic piece on modern financial analysis, "The Intelligent Investor". Written in the 1930s so not as light hearted as the Motley Fools, but still the reference point of many of the world's most successful investors.

 

The next book was Philip Fisher's "Common Stocks, Uncommon Profits". While Graham concentrated on quantitative financial analysis, Fisher looks more closely at the qualitative aspects of a company, though still covering some fundamental financial indicators.

 

Interestingly, Warren Buffett co-wrote the last edition of "The Intelligent Investor" and is also quoted on the front cover of "Common Stocks, Uncommon Profits", highly recommending the book.

 

The next logical step was Buffett himself. Brace yourselves folks because there have been a huge number of book written about the man, the majority of which is anecdotal and repetitive. I concentrated on Hagstrom's "The Warren Buffett Way" and it's sequel, "The Warren Buffett Portfolio". Charlie Munger, Buffett's business partner and co-chairman of Berkshire Hathaway was quoted as saying that the latter of these two is the best book written on Buffett to date.

 

It's also interesting to note that Buffett's methods are largely based on a mixture of Graham and Fishers teachings,

 

Mary Buffett did an OK job with "Buffettology" and I am finding the "Buffettology Workbook" valuable especially as I am probably one of the world's worst maths scholar! 

 

I'm not a big fan of mutual funds but the one book that confirmed what I'd studied in previous literature and which gave me confidence to invest a significant portion of our portfolio in a single US mutual fund was Kazanjian's "Wizards of Wall Street". What I found really exciting about this book was that so many of the 18 very successful fund managers interviewed in the book have investment philosophies that follow similar themes and whose roots can be traced back through the teachings of Graham, Fisher and Buffett.

 

For young people just entering the work place or for those new to investing, a really great read is David Chilton's "The Wealthy Barber". Possibly better, if not as well marketed as "Rich Dad, Poor Dad", this book is a simple introduction to the basics of personal financial management.

 

Finally, offering an interesting slant on what the future might bring, is Harry Dent's "The Roaring 2000s Investor". Now I'm going to be paradoxical here because while I enjoyed and fully endorsed Mary Holm's column recently entitled "When Ignorance is Heroic" and because my man Warren chastises anyone who tries to predict future market trends, this book takes a look at the influence the "baby boomers" are going to have on world financial markets over the next decade. Now as a disclaimer, I'm not changing any of my investments based on this book but I think you'll find it an interesting read and I'll be watching closely to see if the predictions come to pass.

 

So, somewhat long winded, but these are my recommendations.

 

Cheers,

 

Brian

 

"Opportunity comes to the prepared mind"