Invest in your own stock education
Our Thesis: Success leaves traces.
If you know how to read you can prosper knowing the keys that made other investors successful. I am an advocate of having a growing library of stock market information. In response to your email requests, these are some of the books I recommend for your library.
A) Analysis for Long-Term Success
Security Analysis, Benjamin Graham, Dodd: Learn from the Columbia School professor who taught Warren Buffett. Still considered the seminal book on research and assessment, updated in subsequent editions.
This is a book that shows how strict fundamental analysis can be used to find undervalued situations. Graham believed that buying stocks that were markedly undervalued provided investors with a margin of safety. Today’s financial woes have many investors going back to the basics that Graham writes about.
Graham stripped accounts to the bare minimum to find which companies were severely undervalued in the market.
He believed this provided a “margin of safety” that could result in long-term security of capital and then capital appreciation.
The main performance elements are:
1) Profitability – long term
2) Stability of earnings – over a period of ten years
3) Growth: Look for growth between low prices/earnings
4) Financial position – low and manageable debt
5) Dividends: A history of continuous and uninterrupted dividends.
How to Trade Stocks, Jesse Livermore – updated by Richard Smitten
Start with the instructions of the famous Jesse Livermore, who was so dominant on Wall Street that JP Morgan had to enlist his cooperation to stop the panic on Wall Street.
Interestingly, the lessons of the last century are applicable today.
Livermore wrote about his own experiences in Reminiscences of a Stock Operator under the pen name Edwin Lefevre.
1) Patience – wait for a clear trading signal
2) Cash available to use after a signal
3) Need for both a market trend and a sector trend
C) Forecast of raw materials
The new reality of Wall Street Donald Coxe
Don was a strategist at Harris Bank before starting its commodities trust last year. A great overview of the market and a smart overview of the market to come. He made the big call for commodities after a tour of the East and his own personal observations of the growth of the new middle class, in its hundreds of millions.
Don Coxe now manages his own commodities fund (COX.UN). currently it is 30% cash and he is a
Bull waiting for the return of a long-term bull market in commodities. His thesis remains: the millions of people who move into the middle class each year in emerging markets will seek the consumer life of the West, and that means manufacturing millions of homes, televisions, etc. They take huge amounts of basic materials.
D) Buy and hold
Long-Term Stocks, Jeremy Siegel
The data and history combined to strengthen the view that, over the long term, equities are the superior asset class. The three keys—observation, investigation, and analysis—make this book far from a dry dissertation, despite Prof. Siegel’s impressive academic credentials.
Ket’s Thesis: Long-term analysis dictates a 70% equity stake for all portfolios with a 30-year time horizon. It also establishes valuation ratios to project future returns.
E) Mutual Funds
What Works on Wall Street by James O’Shaugnnessy A review of a host of strategies to provide you with data and factual conclusions about their usefulness. The past does not guarantee that the future will repeat successful patterns, but I can assure you that if you refuse to learn what worked, you are at a disadvantage today.
1) Short-term results are useless
2) High price/earnings ratios are dangerous
3) Large-caps are the volatile ones
4) Relative Price Strength Matters “Winners Keep Winning”
F) Hedge funds
Hedge Hoarding, Barton Biggs
Not only does it offer insight from the dean of hedge fund managers, but it’s done in a stylistic and
entertaining fashion. Biggs was ranked as a top strategist from 1996 to 2003. What’s most interesting to me is his insights into the behavior and thinking of clients and their advisors. Even if you and I never “run money” for the wealthy classes, the lessons are applicable to our personal accounts.
G) His Buffett Library
These books are the latest in a small library of material on the “World’s Greatest Investor.”
Snowball – Warren Buffett and The Business of Life
By Alice Schroeder
The candid and open access the author had to Buffett is why the book is so informative. Equally interesting is Buffett’s transition from Graham’s disciple to using Graham’s analysis but allowing growth as a reason to pay more than Graham’s “margin of safety” would allow.
Another book I like is one by his ex-daughter-in-law, who lays out his investment ideas in a short, easy-to-read way:
The New Buffettology of Mary Buffett and David Clark
Focus on stocks in the buffet portfolio and what we can learn from each selection:
1) Seek a sustainable competitive advantage
(a unique product or service that consumers will consistently buy)
2) Historical date: This keeps Buffett out of new technologies
3) The market cycle (and herd mentality at high and low points) offers great rewards for the patient investor
4) A constant high rate of return on equity and capital is a sign of long-term earnings and capital appreciation.
And a similar review of his investment strategies is detailed in Robert Hagstrom’s The Warren Buffett Way.
H ) To develop your own portfolio
Building Your Millionaire Apprentice Portfolio
By Jack A. Bass
My personal favourite-
The watch list system has 12 sectors and a good number of recommendations/top picks in each sector.
It’s not reasonable or advisable to buy every pick, but the AMP system is to have a good number of recommendations that are on your radar screen during a time when the economy and industry dictate a particular industry and basket of stocks in that sector. Do well.
In the uranium/nuclear industry chapter, only Cameco has a current buy recommendation and that is based on the view that a nuclear renaissance is still years away. A review of the current nuclear industry is made and the investment thesis of the sector is given.
The chapter then looks at a number of junior producers and developers to be “watched” and bought as commodity prices and the industry revive.
It is designed for the investor who is knowledgeable about the stock market and who wants a more structured approach to building a portfolio. Available directly from the Millionaire Apprentice Program website.
Knowledge Won’t Happen By Accident: Set Your Goals In Writing
Set a goal of reading one new book a month. In an age where people actually brag about not reading, you can acquire enough knowledge to be an expert in the space of a single year. Follow a reading program for your own benefit, in an age when people spend more time planning their holiday card list than their wallets.
I am also in favor of reading the financial press daily, but not investment advice. The daily press will give you information about the economy. I think the direction of the economy gives you a direction of the sectors that will thrive and the companies that will thrive in that environment. With the knowledge you gain, you will be able to read the daily press, financial magazines and books to develop a list of companies for your own due diligence and the components of your own successful portfolio.