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The 7 Greatest Books for Investing & Money (RANKED!) - YouTube
Channel: The Swedish Investor
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During the last 2.5 years
Iâve read a whole bunch
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of books on investing
and personal finance
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which Iâve summarized
here on this channel.
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And many of you have been asking:
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Therefore, in this video Iâm going to present
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the books about investing that I think will
benefit your stock market journey the most.
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Moreover, I will rank them from simple
to understand to more difficult to understand,
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so that youâll know in which
order you should read them
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if you are quite new to
the world of investing.
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Here are the books that will be covered.
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Without further ado, letâs dive
deeper into each one of them.
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This is the Swedish Investor,
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bringing you the best tips and tools
for reaching financial freedom,
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through stock market investing.
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Number 1 on the list, and the first book
that I think a new investor should read,
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is a book called The Little Book
that Beats the Market.
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It was first released in 2006 and the
author of the book is Joel Greenblatt,
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the manager of Gotham Funds, a hedge fund
with $5.6b in assets under management.
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At 112 pages, the book definitely deserves
its name, but donât let that fool you!
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The Little Book That Beats the Market
reveals what is probably
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my favourite stock screening
strategy â the Magic Formula.
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The Magic Formula finds stock
picks by looking at
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two important performance indicators
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â returns on assets (or capital)
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and the price/earnings ratio
(or earnings yield).
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Joel Greenblatt discusses why these two
key performance indicators are essential
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for successful stock market investing
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and he does so in a really
neat and humoristic way.
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The book is so over the
top and blunt at times
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that Iâve been laughing out
loud while reading it.
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And I tell you â thatâs quite uncommon
for a book about investments.
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Just take this quote from the book which
Iâve presented on the channel before.
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Choosing individual stocks without
any idea of what you're looking for
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is like running through a dynamite
factory with a burning match.
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You may live, but you're still an idiot.
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This book is like 60% education, 40% humor,
which makes it a really enjoyable read.
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As an extra resource, I should add that
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the Magic Formula screener
can be found and used
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for free at magicformulainvesting.com.
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Number 2 on the list is also
a more easy-going book
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and itâs called One up on Wall Street,
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and is written by Peter Lynch.
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It was originally published in 1989.
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Peter Lynch is a legendary investor
from Fidelity Investments,
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and he was the manager of the
Magellan Fund there during 1977-1990.
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During this period he averaged
a 29.2% annual return
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and grew the fund from $18m to $14b.
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That is quite insane so its
no wonder that the book
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has sold in more than 1 million
copies worldwide.
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At 334 pages, the book is more extensive
than the Little Book that Beats the Market
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for sure, but itâs still
quite an easy read.
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The book preaches that you should
use what you already know
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to make money in the stock market
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and for me, this excerption from the
book was something of a wakeup call:
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âIn general, if you polled all the doctors,
Iâd bet only a small percentage would turn out
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to be invested in medical stocks,
and more would be invested in oil;
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and if you polled the shoe-store owners,
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more would be invested in
aerospace than in shoes,
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while the aerospace engineers are
more likely to dabble in shoe stocks.
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Why it is that stock certificates,
like grasses, are always greener
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in somebody elseâs pasture, Iâm not sure.â
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The highlights of the book
are chapters 8 & 9.
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In chapter 8, Peter Lynch discusses
the 13 traits of a âtenbaggerâ,
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referring to stocks that have
a chance to increase tenfold.
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In chapter 9, he discusses 6 traits of
the reversed tenbagger, referring to stocks
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which are heading straight
for the dumpster.
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Some of the characteristics of a tenbagger
which he lists in chapter 8 are quite funny
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and a bit counter-intuitive, such as:
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- The institutions donât own it,
and the analysts donât follow it
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- Itâs in a no-growth industry
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And best of all âŠ
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- Thereâs something depressing about it
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After youâve read and understood
The Little Book that Beats the Market
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and One up on Wall Street
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youâre probably ready for
number 3 on this list
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â The University of Berkshire Hathaway.
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Berkshire Hathaway is of course
Warren Buffettâs firm,
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and itâs one of the largest
public companies existing.
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This book has a very appropriate title,
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becausethe author Daniel Pecaut
has been attending
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the annual shareholder meetings of
Berkshire Hathaway, where Warren Buffett
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and his right-hand man Charlie Munger
perches about investing, for about 30 years.
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These 30 years are summed up in the book.
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The length of the book is 338 pages,
so almost exactly the same length
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as One up on Wall Street, and it is
just a bit more advanced.
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Itâs also quite new as it was
first published in 2017.
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Warren Buffett and Charlie Munger
are two great minds, truly.
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And they arenât just smart,
they are witty too.
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Just consider what they have
to say when they hear rich people
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in western countries complain
about high taxes:
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We think â at least I think
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â Iâm extraordinarily well
treated by this society,
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and I think most people
with high incomes are.
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I think if you transported most of them
to Bangladesh or Peru or something,
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they would find out how much of it is
them and how much is the society.
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Or sometimes they are just really
blunt, which is great too.
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Such as when Charlie Munger is asked
wha he thinks about the GAP figure EBITDA
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which appears in stock market
companiesâ income statements.
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Yeah, I think you would understand any
presentation using the word EBITDA,
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if every time you saw that word you just
substituted the phrase, âbullsh*t earnings.â
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The University of Berkshire Hathaway
includes notes from the highlights
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of the annual shareholder meetings
of the years 1986-2017.
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If you wish to see the meetings
between 1994-2020 yourself
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you can head over to CNBCâs
Warren Buffett Archive.
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This is a great resource, but the meetings
are approximately 5 hours each,
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so thatâs about 135 hours
of watch-time in total.
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This book sums up the same
information in about 10.
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The 4th book that I would recommend
anyone to read is Philip Fisherâs book
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Common Stocks and Uncommon Profits.
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Warren Buffett is often said to have been
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85% Benjamin Graham
and 15% Philip Fisher,
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and Buffett was inspired especially by this
book, which originally is from 1958.
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The book is quite short
at about 200 pages,
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but it has a few more difficult learnings.
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Not that they are technically or mathematically
more difficult than anything
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youâll find in the previous three books,
but to apply them in practice is quite hard.
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Iâll have Charlie Munger present
to you the gist of the book:
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The basic idea of that it was
hard to find good stocks,
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and it was hard to find good investments,
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and that you wanted to be
in good investments.
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And therefore, you just find a few
of them that you knew a lot about,
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and concentrate on those, it seemed
to me such an obviously good idea.
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And indeed, itâs proved to be
an obviously good idea.
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Yet, 98 percent of the investing
world doesnât follow it.
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Thatâs been good for us.
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Itâs been good for you.
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Phil Fisher introduced Warren Buffett
to the idea to of buying great companies
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and holding on to them for forever.
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And Fisher practiced what he preached.
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His and his clientsâ investment in
Motorola allegedly became a 2000-bagger
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after he had held on to it
for many decades.
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With a 2000-bagger you only need
$500 invested to become a millionaire.
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One of the highlights from the book is when
Phil Fisher presents how individual investors
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can use main street resources
to beat Wall Street.
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He advises serious investors to investigate
companies by talking to their suppliers,
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customers, employees, ex-employees,
and best of all â competitors.
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He says that if you were to talk to the top 5
companies within a specific industry
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and ask each company about the other 4,
youâd have a really good picture afterwards
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on who the strongest player
in the business is.
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Number 5 on this list is The Intelligent
Investor by Benjamin Graham.
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I know, you know, everyone knows
- this list could never have been without it.
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Afterall, Iâm not exactly unbiased.
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Benjamin Graham is
âthe father of value investingâ
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and was the teacher of Warren Buffett.
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The Intelligent Investor is
his most famous work,
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even though I would argue that
itâs not the most complete one.
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The book is more technical than
the previous books on this list,
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but it has definitely stood
the test of time,
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considering that it was
first published in 1949.
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Youâll probably not get the most out of it
if you arenât at least a bit experienced
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within the field of investing though.
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Itâs also 640 pages long.
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The book has three core messages:
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- Intrinsic value:
A stock is a piece of a business,
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which means that it has
an intrinsic (or real) value
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- Mr Market:
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The stock market swings from
too pessimistic to too optimistic.
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A true investor is not swayed by Mr Marketâs
unpredictable moods and merely sees
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rising and falling prices as an opportunity,
not as a conveyor of information.
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- Margin of Safety:
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Decisions in the stock market
must always be made
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with a built-in margin of safety.
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This means that you should insist on
buying stocks with a large discount
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to their intrinsic (or real)
business value.
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So those are the key takeaways.
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And I wouldnât want to argue with
Warren Buffett about which chapters
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that are the most important from the book:
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Well Chapters 8 and Chapters 20 are really
all you need to do to get rich in this world.
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If you could say that Warren Buffett has
written any of the books on this list himself,
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it would be this one.
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Number 6 is âThe Essays of Warren Buffettâ,
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which is a book where
Lawrence Cunningham
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has rearranged and structured
the most important takeaways
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from all of Berkshire Hathawayâs
annual shareholder letters into a book.
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Buffett has written these letters himself
and the book was published in 1997.
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The book is 328 pages long, but
thereâs soooo much meat in here.
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Buffett covers everything from the activity
required to become a great investor,
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to mergers & acquisitions,
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to what a shitty place Wall Street is,
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to the evolution of the
newspaper business
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to human psychology,
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to the failure of academics in finance,
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to the importance of contrarianism,
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and back to what a shitty
place Wall Street is again.
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Buffett is an exceptional writer,
teacher and investor,
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and it definitely shows in this book.
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Sometimes, even though he is trying
his best to explain his thinking
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to a lesser experienced audience,
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it just shows how far
ahead his mind is,
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and it can be quite difficult to
grasp some of the concepts.
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An exceptional book nonetheless.
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I should add that almost
all of the Berkshire Hathaway
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annual shareholder letters can be found at
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berkshirehathaway.com/letters for free,
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but Lawrence Cunningham does
a great job of distilling the information.
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And for the final pick among
my 7 favorite books about investing
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we have Security Analysis,
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also written by Benjamin Graham.
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Iâd say that Security Analysis is
Grahamâs magnum opus,
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even though the Intelligent Investor
has gained more popularity.
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It just covers a lot more information.
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And at a massive 851 pages divided into
52 chapters, that definitely makes sense.
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Youâll learn everything from the psychology
of investing, to different types of securities,
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to the financial statements, to portfolio
structure to stock market movements.
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I do recommend that you get the 2nd
edition of the book which is from 1940,
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if you decide to buy it.
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This edition has a lot of great examples and
a few of the later versions of the book
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have apparently distorted
Grahamâs words a bit.
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Here, Iâll highlight three of my favourite
chapters from Security Analysis:
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Chapter 2, which covers the importance of
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studying both qualitative
and quantitative data
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in your search for excellent returns.
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How these two differ in their value
and correctness is discussed.
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Chapter 43, which is about
the significance of
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current-asset values in
listed market companies.
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This is the key ingredient for
screening for net-net stocks
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like Benjamin Graham
was famous to do.
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And chapter 50, which is about the
discrepancies which sometimes occur
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between price and value of stocks.
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The chapter is about where you are
most likely to find discrepancies,
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how you can be more certain once
you think youâve found them,
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and about an alternative approach
to stock market investing
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which I havenât really investigated
too much myself,
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but which do seem promising from
a reversion to the mean standpoint:
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Donât buy companies that are likely
to fall into financial difficulties
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â buy those that already have.
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And there you have it.
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The Little Book that Beats the Market,
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One up on Wall Street,
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The University of Berkshire Hathaway,
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Common Stocks and Uncommon Profits,
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The Intelligent Investor,
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The Essays of Warren Buffett
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and Security Analysis.
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Iâve made a playlist of my summaries
of these books in just that order
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if youâd like to know more about them before
perhaps deciding to read them yourself.
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Check it out!
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Cheers guys!
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