I remember the amount of time it took to discover resources on investing when I started investing. The problem was further amplified by the analysts’ noise on TV and stock market exuberance in the surrounding. Since I would be taking break from active investing for some time, I thought of putting down some resources for budding value investors. Feedback is always welcome. Here is a list of resources that might give a head-start to young investors –
Books are investor’s best friends if one does not have enough people to talk around about investing. Spending more time with books would also help you cut your time watching CNBC and stock market levels. There are many interesting books on investing and the more books you read, the more you would want to read. Here are few good books to get started –
The book is written by Benjamin Graham, the teacher of the investing God Warren Buffet. Although Buffet himself does not follow the quantitative framework provided in the book, it is a good book to start primarily to get into value investing school of thought – paying cents for a dollar and understanding Mr. Market.
2. Annual Letters to Shareholder from Mr. Warren Buffet – Berkshire Hathaway
Investing is best done when it is done like business. And nobody understands business better than Mr. Warren Buffet. Every year Mr. Buffet writes letters to Berkshire’s shareholders and each one of these imparts immense wisdom. Must read for anyone who wants to learn investing or learn business. There is also a book covering the lessons from these letters – The Essays of Warren Buffett: Lessons for Corporate America – a quicker read if you don’t want to download each letter and go through details of Berkshire’s businesses.
Now since we are learning from the writings of the great man, we can also read more about his life from either of these two books – Buffett: The Making of an American Capitalist by Roger Lowenstein or The Snowball: Warren Buffett and the Business of Life by Alice Schroeder. I would recommend both.
Very simple book and quick read simplifying the concepts that Buffet talks about in his letters. That the return on capital employed is one of the best measures to evaluate a business. Once you find a high return business, check if it is available cheap. Mr. Greenblatt puts this across as magic formula investing, read the book to know this magic formula.
In Dhandho Investor, Mohnish Pabrai explains investing just like business is done. His main philosophy – Take bets where you lose nothing (low risk) but there is big upside. Heads I win, Tails I do not lose. Well explained concepts with real life examples. Also clearly explains the difference between risk and uncertainty which very few people really understand.
Blogs / People
Professor Bakshi is a professor at MDI, Gurgaon where he teaches course on Behavioral Finance and Business Valuation (BFBV). He also runs a company and writes an engaging blog. He brings our real examples in Indian scenario which are very hard to find elsewhere. There are lots of good websites/ blogs on value investing written with perspective of western markets, but very few with that of India Markets. This is one of those very few blogs.
A blog written by a value investor and updated quite frequently. I have been reading this blog for many years now on my Google Reader. No two value/intelligent investors think alike. It is always good to understand various investment philosophies and this blog is written with one such philosophy. This blog is must read because of the simple language it is written in.
8. Ramesh Damani
There are many big shot investors in India, but very few who like to spend time with retail investors. I am not talking about analysts who wouldn’t give up a chance to help you or advice you. But this advice comes from a very genuine investor who keeps on improvising himself year after year. Ramesh spends one hour every week in talking to retail investor. Go search on moneycontrol.com and you would find his chat transcripts.
Munger has been Buffet’s partner in his investment journey and some people say that he has been very instrumental in Buffet’s success. He was the major influencing factor in changing Buffet’s investing style from Benjamin Graham’s to the current method which relies on subjective measures as well. Munger’s mental models are very popular and must read for everyone even if these might need multiple re-reads to understand completely. I became a fan of Munger after reading this speech at Harvard Law School.
10. Rakesh Jhunjhunwala
Just for the reason that he is the most successful investor in India, it is worthwhile to study his investment styles. Jhunjhunwala keeps his bets very long-term and many of them don’t work out. However, the successful ones give him manifold returns. Please note that it is futile to just copy him. Three reasons – 1) because your risk profile might be completely different from him, 2) because there is significant time lag between the time he makes his investment and the time it is known to public and 3) because not all his ideas work.
This is a good site to follow for two reasons – 1) you will find very high quality articles submitted every day and 2) the links shared on the website are equally interesting. Besides these, there are other things like investment quotes, book reviews, write ups like Week with The Economist. Heavy readers can easily spend an hour or so every day on this site. I miss those days when I had that time.
Unlike other brokerage firms and portfolio management companies that promise steep returns in few days, Parag Parikh Financial Advisory Services Ltd’s philosophy is like a turtle, which is also the company’s logo. Research reports and weekly newsletter from PPFAS are good reads for value investors.
13. Business Magazines and Newspapers
Naseem Taleb, in his book Fooled by Randomness, mentions that daily news is like noise in the long-term graph of events. History is the true signal that filters out the noise generated every day. Always keep the long-term perspective while reading any article or news item. Some good magazines and newspapers that are worth mentioning are – Forbes India, Business World, The Economist, Forbes, Fortune, The Hindu Businessline, Wall Street Journal and The Mint.
14. Company Annual Reports
Annual Reports can be read with two purposes – to understand the financials and business of the company we are reading or to understand the business in general. Annual reports can help us understand many things. The key points to consider while reading the annual report –
– How transparent is the management?
– How much salary is drawn by the management?
– Business financials – Free Cash Flows and the usual financial numbers [check this video – 10 Points for Value Investing]
– Any Red Flags?
– Always good to measure up if all the promises made in earlier years’ annual reports have been fulfilled
15. Not-to-do list
– Do not watch CNBC regularly. In case you do, just do it of entertainment
– Do not follow stock market levels on hourly basis or daily basis. It is waste of your time unless you are following it for your entertainment.
– Do not invest in ULIPs / Mutual Funds without understanding the management fees and other T&Cs
– Do not invest with borrowed money. Markets can always fall 50% or more from any level.
– And: Do not lose money 🙂 – not very easy thing to do in stock market.