The Short List

Investing Book List

June 2012 Top Ten

1. The Essays of Warren Buffett : Lessons for Corporate

America. ***** Warren Buffett (Edited by Lawrence
Compiled by: Cunningham). Also see the unedited letters: “Chairman's
Arun Rao Letters.” Warren Buffett. Online at:
www.berkshirehathaway.com

Introduction 2. The Intelligent Investor: A Book of Practical Counsel.

***** Benjamin Graham. (Margin of safety. The
The best way to learn about finance and investing is to go difference between "investing" and "speculation." A
to your local public library and read everything on the businessman’s approach. Focus on chapters 8 & 20.)
shelves on that topic. Then go to a nearby research library
(like UCLA’s Rosenfeld management library collection) 3. Poor Charlie's Almanack, 2d Ed.***** Charles T.
and continue that reading. Investing is like writing – only Munger. (Munger’s take on the world – his view on
you can teach yourself how to do it. Yet the insights and extreme concentration, 5-10 positions, was what Buffett
experience of others can help. After getting the theory did at Berkshire, moving beyond Ben Graham’s
down, the best thing a student of investing can do is to “diversified pool” style of special situations).
read many financial statements (10-Ks, 10-Qs, S-1s, etc.)
directly from EDGAR, use Capital IQ and Bloomberg 4. The General Theory of Employment Interest And
often, and invest an actual sum of money real-time. Money (1936). (Chapter 12, Long-Term Expectation).
Getting a CFA charter helps - it establishes a baseline of ***** J.M. Keynes. (One of the best essays on investing
knowledge. ever written).

The following list presents my reading recommendations. 5. Buffett: The Making of an American Capitalist. *****
Some are well-known and others are idiosyncratic. I Roger Lowenstein. (The best bio on any financier ever).
present them in no particular order, but with stars (*****
is the best, * the “least good”) based on what I took from 6. Valuation: Measuring and Managing the Value of
them. The whole exercise is completely subjective and I Companies, 5th Edition (Wiley Finance). **** McKinsey
hope you make your own list. & Company Inc., Tim Koller et al.

7. Financial Statement Analysis: A Practitioner's Guide,

3rd edition.**** Martin S. Fridson. (Learn the ROE
breakdown and accounting nuances.)

8. Business Strategy and Security Analysis: The Key to

Long Term Investment Profits. **** Raymond K. Suutari.
(Advanced qualitative tools for identifying good
businesses - economic value drivers behind the ratios.)

9. A History of Interest Rates: Fourth Edition, Revised.

***** Sidney Homer and Richard Sylla. (The dean of
Salomon Brothers research offers perspective on interest
rates, the lifeblood of finance. This book gives a needed,
millennial perspective on the most important external input
in valuation).

10. Make Your Own Luck.**** Eileen Shapiro et al. (A

systematic and probabilistic way to make investment and
business decisions).
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 The Theory of Investment Value. *** John Burr Williams.
The Long List (The first DCF model and how to think about opportunity
costs).
Theory & Valuation of Investments
Fortune's Formula: The Untold Story of the Scientific
Investment Valuation: Tools and Techniques for Betting System That Beat the Casinos and Wall Street. **
Determining the Value of Any Asset, Second Edition. William Poundstone. (The most important formula for
**** Aswath Damodaran . (Basics on valuation modeling. position sizing).
Skip the cost-of-capital nonsense. See also:
http://pages.stern.nyu.edu/~adamodar/ )
Fixed Income & Derivatives (Credit,
Competitive Strategy. *** Michael Porter. (You need to Sovereign, Distressed Debt, etc.)
understand the economic forces behind accounting
numbers.) Inside the Yield Book. **** Sidney Homer. (Great insight
from the Salomon Brothers bond research dept. founder on
Security Analysis (1st through 4th editions). ***** how to think about fixed income valuation – early duration
Benjamin Graham and David Dodd. (Learn how to think analysis insight).
about valuation and the capital structure – avoid the 5th
edition). The Handbook of Fixed Income Securities, 8th Edition.
Frank Fabozzi et al. ***** (The single best and most
Risk Arbitrage. *** Guy Wyser-Pratte. (A great comprehensive book on the fixed income markets – a good
introduction to risk arb). place to start for intermediate readers).
You Can Be a Stock Market Genius. **** Joel Greenblatt. Bond Portfolio Investing and Risk Management. Vineer
(A lame title but good book on special situations Bhansali. ***** (A nice book on developing an intuitive,
investing). economic understanding about fixed income markets from
a PIMCO portfolio manager).
Margin of Safety: Risk-Averse Value Investing Strategies
for the Thoughtful Investor. *** Seth A. Klarman. (The Leveraged Financial Markets: A Comprehensive Guide to
book is out of print but a bootleg pdf copy circulates on the Loans, Bonds, and Other High-Yield Instruments.
internet along with old Baupost investor letters). William Maxwell and Mark Shenkman. **** (An old-
timer HY investor and professor write about the leveraged
One Up On Wall Street : How To Use What You Already finance markets in more detail than Fabozzi).
Know To Make Money In The Market. *** Peter Lynch.
(Practical advice on how to capitalize on your area of Fixed Income Securities, 2th Edition. Bruce Tuckman et
knowledge and your strengths in picking stocks). al. **** (A succinct book on fixed income securities and
pricing by some former prop traders).
John Neff On Investing. *** John Neff. (Bargain
investing tips). The Strategic Bond Investor. *** Anthony Crescenzi.
(All investors need to understand bonds, the money
Pioneering Portfolio Management: An Unconventional market, and the yield curve – this is a good introduction
Approach to Institutional Investment, Fully Revised and for people with no fixed income background).
Updated. **** David F. Swensen. (The best book about
managing a large endowment portfolio and thinking about Stigum's Money Market, 4th Edition. ** Marcia L. Stigum
asset classes, though with some flaws.) and Anthony Crescenzi.
(More information – a reference text).
Risk, Uncertainty, and Profit. ** Frank Knight. (An old
classic on thinking about risk.) PIMCO Commentary. *** Bill Gross and El-Erian on the
PIMCO website and op-eds in the Financial Times.
“Black Monday and Black Swans,” Financial Analysts
Journal. *** John C. Bogle.
http://www.cfapubs.org/doi/ref/10.2469/faj.v64.n2.9
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The Most Important Thing: Uncommon Sense for the Financial Statement Analysis, Modeling, and
Thoughtful Investor. *** Howard Marks. Accounting
(By the brilliant Oaktree co-founder – also see his Oaktree
Chairman’s Memos online). Creative Cash Flow Reporting: Uncovering Sustainable
Financial Performance. **** Charles W. Mulford. (Dry
Distress Investing: Principles and Technique (Wiley but one of my favorite accounting books - it is the single
Finance). ** Martin J. Whitman and Fernando Diz. best book on how to read a cash flow statement. It teaches
(Whitman is a good but not the best at this). one how to assess a company's sustainable free cash flow,
which is what a rational investor uses to value a company.
Distressed Debt Analysis: Strategies for Speculative Also see Bernstein’s “Analysis of Financial Statements,”
Investors. ** Stephen G. Moyer. (Best detailed book about Kieso’s “Intermediate Accounting,” and Ben Graham's
the dirty distressed world). little book on accounting).

The Vulture Investors, Revised and Updated. ** Hilary Financial Shenanigans: How to Detect Accounting
Rosenberg. (Color into past distressed situations). Gimmicks & Fraud in Financial Reports, Third Edition.
**** Howard Mark Schilit PhD. (Very good tips on
Corporate Financial Distress and Bankruptcy: Predict and reading financial statements, which are marketing
Avoid Bankruptcy, Analyze and Invest in Distressed Debt documents, skeptically - Learning the limits of bean-
, 3rd Edition. * Edward I. Altman and Edith Hotchkiss. counting is important if you wish to really understand
(Good empirics, worse on strategy). accounting. See Wells’ “Fraud Casebook” for the dark
side - avoiding junk. The best exercise is to reverse-
Chapter 11: Reorganizing American Businesses engineer fraud from old 10-Ks).
(Essentials). * Elizabeth Warren. (Learn the law).
Best Practices for Equity Research Analysts: Essentials for
Strategies for Creditors in Bankruptcy Proceedings. **** Buy-Side and Sell-Side Analysts. ***
Lynn M. LoPucki and Christopher Mirick. (Learn even James J. Valentine. (How to do better modeling and
more law). research).

Options, Futures, and other Derivatives. * John Hull. Financial Modeling. *** Simon Benninga. (The bible on
(The quant bible that indoctrinates most MBA students – I modeling from Wharton).
think it’s just OK and I’m not a fan of these financial
WMD as used by most investors). Wiley Interpretation and Application of International
Financial Reporting Standards 2011 (Wiley Ifrs). *
Option Volatility and Pricing. ** Sheldon Natenberg. Bruce Mackenzie. (Ugly but required).
(Covers options in theory and practice, so better).
A History of Accountancy in the United States. * Gary
Credit Derivatives. ** Geoff Chaplin. (An advanced look John Previts. (Make some sense of the historical reasons
at all things credit). of the system).

Dynamic Hedging: Managing Vanilla and Exotic Options.

*** Nassim Nicholas Taleb. (Hard reading on a hard Thinking Probabilistically, Doing Research,
subject, but useful – see Taleb’s popular books too). and Analyzing Mistakes

Psychology of Intelligence Analysis. **** Richards J.

Heuer Jr. (A CIA instructor on how to analyze data).

Thinking in Time: The Uses of History for Decision-

Makers. *** Richard E. Neustadt and Ernest R. May.
(Two Harvard Kennedy profs with some useful policy
analysis tips by using history – these apply to investing).

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The Art of Strategy: A Game Theorist's Guide to Success Models of man: Social and rational. *** Herbert Simon.
in Business and Life. ***Avinash K. Dixit and Barry J. (The creator of bounded rationality reflects on bounded
Nalebuff. (Game Theory 101). reason and human incompleteness).

Investigative Reporter’s Handbook. *** Brant Houston. How to Solve It. ** George Polya. (A good math book).
(Tricks reporters use to dig up information).

In an Uncertain World: Tough Choices from Wall Street to

Washington. ** Robert Edward Rubin. (Rubin mentored
some of today's best hedge fund investors: Lampert/ESL, Governance and Investing like a Private
Mindich/Eton Park, Singh/TPG-Axon, Och/Och-Ziff, Businessperson
Perry/Perry, etc. Read the first third of this book; learn
Rubin's probabilistic way of thinking). The Dhandho Investor: The Low - Risk Value Method to
High Returns. **** Mohnish Pabrai. (How to think and
Common Stocks and Uncommon Profits and Other invest like a private businessperson – also Google his PPT
Writings. *** Philip A. Fisher. (Basic qualitative tools for presentation on investing checklists).
identifying good businesses. An investor is both a skeptic
and an investigative journalist.) Private Equity: History, Governance, and Operations. **
Harry Cendrowski. (How private investors think – also
Thinking and Deciding, 4th Edition. *** Jonathan Baron. see Sobel’s book on Geneen and Jack Welch’s memoirs).
(Modes of thinking and how to be “more rational”).
Lessons from Private Equity Any Company Can Use. **
Thinking, Fast and Slow. *** Daniel Kahnemann. Orit Gadiesh and Hugh Macarthur. (Some great PE tips on
(Discusses two modes of thinking and how to use each how to run a business).
mode to make better decisions – from the father of
prospect theory and cognitive bias/behavioral economics How Cartels Endure and How They Fail: Studies of
theory). Industrial Collusion. ** Peter Z. Grossman. (Great
companies tend to be natural oligopolies or monopolies).
Models Behaving Badly. ** Emanuel Derman. (The King
of Quants on how common sense, intuition, and good Antitrust Stories. *** Eleanor M. Fox and Daniel A.
assumptions about reality matter in building models). Crane. (Case histories on some fine businesses to own).
The Theory That Would Not Die: How Bayes' Rule Corporate Governance. *** Robert A. G. Monks and Nell
Cracked the Enigma Code, Hunted Down Russian Minow. (Governance/ownership is important, and silly
Submarines, and Emerged Triumphant from Two investors forget this while activists live on it. See
Centuries of Controversy. ** Sharon Bertsch. (The most Bebchuk's “Pay without Performance” too).
important formula in investing, along with the Kelly
Criterion – all investing is Bayesian decision-making). The Law of Corporations: In a Nutshell. * Robert
Hamilton. (Basics – you have to know this).
The Billion Dollar Mistake: Learning the Art of Investing
Through the Missteps of Legendary Investors. ** Corporation Law, 2d Edition (Hornbook). * Franklin
Stephen L. Weiss. (Learn from others’ mistakes and make Gevurtz. (A reference text).
fewer of your own – this book is just a start).
Mergers & Acquisitions: The Essentials. * William J.
In Retrospect. ** Robert McNamara. (A smart man Carney. (More basics – helpful to know).
recounts his dumb mistakes).
Securities Regulations: The Essentials. * Stephen J. Choi.
The Fog of War (film documentary). **** Errol Morris. (Basics to avoid landing in jail).
(A film about the smart man above and his dumb
mistakes).

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 Triumph of the Optimists: 101 Years of Global Investment
Real Estate Investing Returns. ** Elroy Dimson and Paul Marsh. (International
data on returns).
The Real Estate Game: The Intelligent Guide To
Decisionmaking And Investment. **** William J. Poorvu Globalizing Capital: A History of the International
and Jeffrey L. Cruikshank. (The best quick read on how to Monetary System (Second Edition). **** Barry J.
think about real estate – Poorvu taught at HBS, mentored Eichengreen. (A gripping history - It's important to
Klarman, and has some great cases). understand the macro big picture – see also Maggie
Mahar's “Bull”).
Real Estate Finance & Investments: Risks and
Opportunites; (3rd Edition). ***** Peter Linneman. Global Capitalism: Its Fall and Rise in the Twentieth
(The best book on investing in real estate, hands down). Century. ***Jeffry A. Frieden. (A good complement to
the Eichengreen book).
Investing in REITs: Real Estate Investment Trusts. **
Ralph L. Block. (The only decent book on this). Money of the Mind. *** James Grant. (Grant documents
well how to spot a credit bubble and how to protect oneself
The Wall Street Journal. Complete Real-Estate Investing against it – hint: US Treasury bill holdings, or the future
Guidebook. *** David Crook. (A good book on the best risk-free asset equivalent).
practical way to invest in real estate – go buy local
properties in a time of distress – own and manage them
directly). Speculation & Shorting
Examples & Explanations: Real Estate Transactions, 5th The Art of Short Selling. **** Kathryn F. Staley.
Edition. * Barlow Burke. (Damn the law). (It's important to be hedged heavily near extremes and
lightly in moderate times – or learning how to short well
can help you to be a better long investor).
Macro Investing and Capital Markets
Market Neutral Strategies. ** Bruce I. Jacobs et al. (Some
The Alchemy of Finance. *** George Soros. (Read all of good thoughts on hedging and risk arbitrage – Danny
Soros’s books to understand reflexivity, non-stable Och’s chapter on risk arb is the best one).
rules/relationships, and adaptability – I also like his
lectures at CEU). Beat the Market: A Scientific Stock Market System. ***
Edward O. Thorp. (An out-of-print book on hedging. It's a
Soros on Soros: Staying Ahead of the Curve. *** George classic, esp. for intelligent long/short work. A silly title,
Soros. (Interviews on how the paranoid man thinks – also but the book is so good that it's expensive!)
see Jim Rogers’ two travel memoirs for country analysis
and Victor Niederhoffer's books on speculation). Reminiscences of a Stock Operator. **** Edwin Lefevre.
(A classic - Livermore is the godfather of today's trader-
Stocks for the Long Run : The Definitive Guide to speculators. Also see Jack Schwager's two “Market
Financial Market Returns and Long-Term Investment Wizards” books, which offer more insight on the trader-
Strategies. ** Jeremy J. Siegel. (Facts on asset classes, speculator, and “Where are the Customer's Yachts” on
long-term returns, the im-permanance of value – also see how the Street screws everyone).
Seigel's “The Future for Investors” and the research of
Steve Leuthold on stock returns and the impermanence of The Battle for Investment Survival. *** Gerald M. Loeb.
large companies). (Loeb hits you hard; he tries both to invest and speculate.
The line is thin and dangerous. Focus on pp. 49-62, 119-
Ibbotson SBBI 2010 Classic Yearbook, Market Results for 124).
Stocks, Bonds, Bills, and Inflation 1926-2009. ***
Morningstar. (Pure, lovely data – I have a more complete The Big Short. **** Michael Lewis. (Paraphrasing Steve
spreadsheet where I’ve compiled data from many countries Eisman said, this is porn for speculators and horror for
and sources). investors).

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The Greatest Trade Ever: The Behind-the-Scenes Story of *** Michael M. Pompian. (Best book on behavioral
How John Paulson Defied Wall Street and Made Financial finance).
History. ** Gregory Zuckerman. (The best short trade
ever). "A Survey of Behavioral Finance" in Handbook of the
Economics of Finance. By Nicholas Barberis and Richard
Fooling Some of the People All of the Time, A Long Short Thaler, edited by G. Constantinides, R. Stulz, M. Harris
(and Now Complete) Story, Updated with New Epilogue. eds., North Holland, Amsterdam, 2003. ****
** David Einhorn. (A bad short trade – it shows the perils (See all the research and books by Thaler, Kahnemann, &
of shorting even when a company is rotten plus the rot at Tversky).
the core of the regulatory system).
The Intuitive Investor: A radical guide for manifesting
Confidence Game: How Hedge Fund Manager Bill wealth. **** Jason Apollo Voss. (An important book
Ackman Called Wall Street's Bluff. ** Christine S. because it goes into the emotions about investing –
Richard. (It can take a long time for a short to work and emotional or right-brain/creative reasoning often hurts
time works against you). investing but instead should be harnessed to help).

The Mind of Wall Street: A Legendary Financier on the Predictably Irrational, Revised and Expanded Edition: The
Perils of Greed and the Mysteries of the Market. ** Leon Hidden Forces That Shape Our Decisions. ** Dan Ariely.
Levy and Eugene Linden. (A recent shrewd investor). (All humans, even the most rational ones, are mostly
irrational).
No Bull: My Life In and Out of Markets. ** Michael
Steinhardt. (A recent tough operator).
Analyzing Banks and Insurance Companies
The Money Masters. Money Masters of Our Time. **
John Train. (Two books – can you tell the investors apart Financial Instruments and Institutions: Accounting and
from the speculators?). Disclosure Rules. ***** Stephen G. Ryan. (The best
book on looking at bank statements).
The Invisible Hands: Top Hedge Fund Traders on
Bubbles, Crashes, and Real Money. * Steven Drobny. The Farmer From Merna. *** Karl Schriftgeisser. (To
(Again, look at the line between speculation and understand finance, you need to understand the insurance
investment). business - many ideas overlap. Also see Wright's
“Mutually Beneficial” and the CS primer).

Cycles, Manias, Bubbles, & Psychology “Property-Casualty Insurance Primer” (issued annually).
*** Credit Suisse. 2000-2011. (A great industry survey).
Manias, Panics, and Crashes: A History of Financial
Crises. ** Charles P. Kindleberger. (A historical Analysis and Valuation of Insurance Companies. *****
perspective on crashes and downturns. Markets are often Doron Nissim. Columbia Business School paper. Center
fairly efficient, but not always. The difference is night and for Excellence in Accounting & Security Analysis. Nov.
day. Chancellor's “Devil Take the Hindmost” is the 2010.
perfect complement). http://www.columbia.edu/~dn75/Analysis%20and%20Val
uation%20of%20Insurance%20Companies%20-
Business Cycles: History, Theory and Investment Reality. %20Final.pdf
** Lars Tvede. (Cycles never end – see the NBER data
too). Handbook of Accounting for Insurance Companies. *
Clair J. Galloway. (The best of a bad lot).
Financial Crisis, Contagion, and Containment: From Asia
to Argentina. * Padma Desai. (A nice short read). The Guide to Understanding the Insurance Industry 2009-
2010: Check out the vital signs of financially fit insurers. *
Behavioral Finance and Wealth Management: How to A.M. Best Company. (A quick read).
Build Optimal Portfolios That Account for Investor Biases.

6
Fundamentals of Risk and Insurance. *** Emmett J.
Vaughan & Therese M. Vaughan. (A solid overview of all Grant. Bernard M. Baruch.
the business lines).
Partnoy. The Match King: Ivar Kreuger.

US Financial History and Biography Galbraith. The Great Crash of 1929.

[NOTE: I only present the author’s last name and the title Ellis. Capital. [Capital Group]
here – the books are in rough chronological order].
Ellis. The Partnership. [Goldman Sachs]
Johnson. A History of the American People.
Cannadine. Mellon: An American Life.
Blaszczyk. Major Problems in American Business History:
Documents and Essays. Getty. As I See It.

Ferguson. The Ascent of Money: A Financial History of Brooks. Once in Golconda: A True Drama of Wall Street
the World. 1920-1938.

Bernstein. Against the Gods. Brooks. The Go-Go Years: The Drama and Crashing
Finale of Wall Street's Bullish 60s.
Friedman. A Monetary History of the United States.
Stevens. King Icahn.
Friedman. Money Mischief.
Torgerson. Kerkorian: an American success story.
Galbraith. Money: Whence It Came.
Winan. King of Cash. [Tisch]
Rogoff/Reinhart. This Time Is Different: Eight Centuries
of Financial Folly. Burrough. Barbarians at the Gate: The Fall of RJR Nabisco

Fisher. 100 Minds That Made the Market. Schroeder. Snowball. [Buffett]

Oberholtzer. Jay Cooke, Financier of the Civil War. Roubini/Setser. Bailouts or Bail-ins?

Sarnoff. Russell Sage. Lowenstein. When Genius Failed.

Klein. Jay Gould. Blustein. The Chastening.

Klein. Harriman. Blustein. And the Money Kept Rolling In.

Krass. Carnegie. McLean. Smartest Guys in the Room: The Amazing Rise
and Scandalous Fall of Enron.
Watts. The People’s Tycoon: Henry Ford.
Mallaby. More Money Than God.
Bruner. Panic of 1907.
Carey. King of Capital. [Blackstone/Schwartzman]
Chernow. The House of Morgan.

Strouse. Morgan: American Financier.

McDonald. Insull.

Meltzer. A History of the Federal Reserve.

7
Suggested Business Newspapers &
Resources

Beyond the papers below, I think industry publication and

trade magazines are your best bet.

Economist*****
Financial Times*****
Wall Street Journal****
Barrons**
Value Line*****
New York Times***
Washington Post*
USA Today***
S&P Industry Surveys**
Value Investor’s Insight***
Santangel’s Review***

Der Spiegel International***

Handelsblatt**
Nikkei*
Les Echoes*
Hong Kong Standard**
Caijing **
Economic Times**
Outlook India**
China International Business*

Business Databases:
http://www.library.upenn.edu/cgi-
bin/res/sr.cgi?fotlp=&community=77&resourcetype=1

A Final Note

Many great investors and analysts give insightful

interviews and publish periodic market commentaries.
Some sources that have influenced me greatly:

Warren Buffett, Bill Ackman, Mohnish Pabrai, Paul

Singer, James Chanos, Walter Schloss, Dr. Michael Burry,
Joel Greenblatt, David Einhorn, Howard Marks, George
Friedman, Jeremy Grantham, Hugh Hendry, John
Hussman, Seth Klarman, John Mauldin, Eric Mindich,
John Paulson, John Scully, Richard Rainwater, Michael
Pettis, Pimco (Bill Gross and Mohamed El-Erian), Robert
Prechter, Jim Rogers, Jeff Ubben, Nouriel Roubini, Brad
Setser, Victor Shih, George Soros, and Peter Thiel.