3 Books That Make You a Better Investor
Are you a reader? After reading hundreds of books across multiple topics, I came to realise that you can always learn a thing or two from any book. Here are three of my favourite investing books and what they had taught me.
Good to Great by Jim Collins
It is not surprising to find good advice from business books that teach us more about how to find a great investment. Good To Great, the best-selling book by Jim Collins, talks about why some companies can push themselves beyond the just being a good company to becoming a great company. Jim researched on multiple companies that have produced great returns for its shareholders over a 15-year period. He discovered characteristics about these great businesses that are extremely applicable to us as investors.
Some of the interesting factors of these great companies include having a great leader who put the company’s interest ahead of his or her own ego. These companies are able to face the brutal reality of their situation but yet never to lose faith in their future. All these companies also have a wonderful culture; a culture of discipline where its employees are all passionate about the mission of the company. These are some also things I look out for in companies when I am researching on investment opportunities, and so far, they have rarely failed me.
The Buffett Way by Robert Hagstrom
Who better to learn to invest from than the great Warren Buffett. Although not written by him, The Buffett Way, by Robert Hagstrom, looks into specific investments that Buffett made and analyses his thought processes.
The book talks about finding investments based on the four key tenets that Buffett might use himself. Hagstrom argued that when looking for great investments, we should focus on the business of the companies, the capability of management teams, their financial performance and strength and lastly, their valuation. If we are able to find companies that fit into all these four key tenets, we might have found our next great investment.
The Smartest Guy in the Room by Bethany McLean and Peter Elkind
One of the first and most interesting business books I have ever read is The Smartest Guy In The Room, by Bethany McLean and Peter Elkind. The book focuses on the rise and fall of Enron, the massive fraudulent company that came crashing down around 2001.
The book looks into how Enron fooled the entire investment community for such a long time. It shows that companies can hide their unethical business practices by creating complex structures and confusing business models.
The book reminds me to only invest in companies that I understand and not rush into investing in companies that are loved by the masses.
As an investor, we are first and foremost a business analyst rather than an investment analyst. Therefore, we have to view each company on its own fundamentals. These three books can teach us more about what makes a great business, what makes a lousy business and how Warren Buffett would look at companies. All are important things we need to take note of as an investor.