16 June 2008
Investment 201: a summer reading list
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In the past I have put together a reading list of books that to my mind forms the core of whatevery investor should know. Every so often someone will ask me what I would add to that listtoday. This note seeks to answer that question by selecting 10 additions to my original list.The choices are personal and eclectic, as ever. My top two picks for summer reading areDavid Einhorn’s
Fooling all of the people some of the time
and Dan Ariely’s
To give my selections some structure I have split them into three categories: Finance (5books), Psychology (3 books) and Hidden Gems ( 2 books). In the Finance sections, my firstchoice was David Einhorn
Fooling all of the people some of the time.
Not only is itexcellently written, but the lessons on just how far a corporate will go to hide the truth, andhow to conduct fundamental analysis are salient to all of us. Rob Arnott et al
is a must-read
anything that provokes almost vitriolic responses fromboth active and passive managers must be good! Louis Lowenstein
The Investors Dilemma
will make uncomfortable reading for many in the fund management industry as it highlightsthe problems caused by the conflict of interest raised when management companies areseparate from the funds themselves.
My last two books in the finance section aren
t necessarily beach reading but they are akey part of the investor
s toolkit. Howard Schilit
, and CharlesMulford and Eugene Comiskey
Creative Cash Flow Reporting
both cover the topic ofspotting companies that may be attempting to mislead investors. After a five-year earnings-driven bull run, these skills may well need some refreshing.
In the psychology section, Dan Ariely
is the must read of the year.It is a field guide to just how far our behaviour deviates from a
benchmark. Theexperiments that Ariely runs are ingenious, insightful and fun. Coming in a close second is
Mistakes were made (but not by me)
by Carol Tavris and Elliot Aronson. This book details theself justification that we indulge in when faced with situations where our actions and beliefscome into conflict. Carol Dweck
is my third choice. This book concerns how wedeal with failure, and how we can learn from our mistakes
The two hidden gems for this year are Atul Gawande
Better: A surgeon’s notes onperformance
and Sydney Finkelstein
Why Smart Executive Fail
. The former details thecriteria required for success in medicine which seems to have a high degree of overlap withfinance. The latter is the antithesis of all the management success books out there
casestudies in failure help to highlight common areas of corporate disasters. Albert and I wish to thank our readers for their continued support. The results of the 2008Thomson Extel Survey of European Analysts were recently announced, and due to yourvotes, we were voted not only the top Global Strategy team, but also the top team acrossthe entire survey (combining both macro and equity sectors). We really appreciate this levelof support and hope we can continue the flow of stimulating ideas to justify it.