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BOOKS BY SUCCESSFUL INVESTORS

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Pat Dorsey is the Director of Equity Research at Morningstar, Inc.  He played an integral role in the development of the Morningstar Rating for stocks, as well as Morningstar's economic moat ratings.

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In his book, The Little Book that Builds Wealth, Dorsey makes the case for investing in companies that are likely to generate above-average earnings for several years into the future; as the ability to hold stocks with strong earnings long-term will enable the investor to compound earnings at a remarkable rate.

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Dorsey argues that economic moats are key to being able to identify businesses are likely to possess the means of generating above-average earnings long-term, as they enable firms to maintain their market share and earning power.  Dorsey identifies intangible assets, consumer switching costsnetwork economics, and cost advantages, as key factors that determine the long-term earnings potential of businesses.

The Little Book that Builds Wealth

 by Pat Dorsey

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Peter Lynch, known for successfully managing Fidelity's Magellan Fund from 1977 to 1990, is arguably one of the most successful investors of all time. 

 

I believe his book, Beating the Street, should be viewed as supplementary reading to his best-selling book, One up on Wall Street, as Beating the Street provides an expansion on his investment philosophy, which is outlined in One up on Wall Street, through example investments that he made throughout his career.

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Nonetheless, this book provides further insight into the mind of one of the greatest investors and details his rationale for particular investments that he made while managing Magallan.

Beating the Street

by Peter Lynch

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Jim Paul, a lesser-known investor and perhaps antithetical to the title of this list, Paul's book, What I Learned Losing a Million Dollars, deals with investment failure.  Yet, this is precisely why it is a must-read for understanding finance and investing.  As the majority of books in this genre explore methods of achieving investment success.  This is a rare instance of an investor examing his own investment failure; and, consequently, exploring investing from an alternative and uncommon perspective.

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The book is written in a similar style to that of a memoir or a short autobiography, and it is, consequently, very easy to read.  Paul traces his path from his early life and career, to serving on the Chicago Mercantile Exchange Board of Governors and Executive Committee and the primary event of the text - losing one million dollars.  Paul goes on to examine and expand on the psychological aspects and particular events that led to this loss.

What I Learned Losing a Million Dollars

 by Jim Paul and Brendan Moynihan

What I Learned Losing a Million Dollars.

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Kenneth Marshall earned his MBA at Harvard Business School, and currently teaches value investing in the Masters in Finance program at the Stockholm School of Economics and at Stanford University.  He is also a past member of the Stanford Institute for Economic Policy Research.

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In his book, Marshall provides the reader with a comprehensive overview of the key elements of value investing: from the principles of value investing to methods of analysis that enable the reader to gain an intuitive understanding of the primary elements that determine a stock's suitability as a potential investment target.  

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Furthermore, Marshall includes a number of case studies throughout the text using annual reports that allow the reader to see the practical application of Marshall's method of analysis.

Good Stocks Cheap

 by Kenneth Jeffrey Marshall

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6/

John Bogle (1929 - 2019), the father of index funds, founded the Vanguard Group in 1974, which is currently one of the largest asset management firms in the world, with AUM of approximately $6trn.

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In his book, The Little Book of Common Sense Investing, Bogle makes the case for index funds.  His thesis stems from transaction costs, investor irrationalitydiversification, and several other variables - all of which provide strong evidence in favour of the utility of index funds.

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I would argue that Bogle was one of the most influential investors of all time, as his vision of index funds has, most likely, generated strong returns for a greater number of investors than any other individual in history.

The Little Book of Common Sense Investing

 by John C. Bogle

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Christopher Browne (1946 - 2009) was a Managing Director of Tweedy, Browne Company LLC and was a member of the firm's management committee; Browne also served on the faculty advisory committee of Harvard's John F. Kennedy School of Government program in investment decisions and behavioural finance.

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In his book, The Little Book of Value Investing, Browne introduces the reader to value investing and then goes on to offer specific ideas, insights, and tips for a potential value investor to contemplate.  This includes fundamentals, such as approaches to valuing stocks and the importance of earnings for generating a return; as well as specific variables to consider during analysis such as following insider behaviour, analysing company accounts, and methods of identifying investment opportunities.

The Little Book of Value Investing

 by Christopher H. Browne

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Howard Marks is the chairman and co-founder of Oaktree Capital Management, an LA-based investment firm with $80bn under management.  His book is based on investment memos that he has been writing to his clients for over twenty years that detail his investment philosophy and opinion of contemporary financial events.  This provides the book with a unique characteristic, as selected memos are included in the book, with Marks expanding upon them throughout the text.  Accordingly, the reader can see the author's thinking at the time of the events and his views retrospectively.

 

Marks covers a variety of topics from understanding risk and value to the influence that investor sentiment and behavioural finance have on the functioning of financial markets.  Overall, I would argue that The Most Important Thing has influenced my views on finance and value investing more than any other book, as each chapter has a truly insightful take on several topics related to finance and investing.  After reading the book, it is clear just how intelligent, open-minded, and rational Marks is as an investor and individual.

The Most Important Thing

 by Howard Marks

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Joel Greenblatt earned his B.S. and MBA degrees from the Wharton School of the University of Pennsylvania.  In 1985, Greenblatt founded Gotham Capital with $7m, mostly provided by junk bond investor, Michael Milken; as of 2019, Gotham Asset Management has AUM of approximately $5.6bn.

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In his book, Greenblatt introduces some fundamental investment concepts and his views on the investment industry - which I feel are key to understanding how Greenblatt is able to generate such incredible returns.  Following this, the book is devoted to exploring special situations such as spin-offs, corporate restructurings, risk arbitrage, and more.  Greenblatt details how he is able to take advantage of these special situations to generate substantial investment returns.

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Overall, I highly recommend this book, even if you are not interested in special situations, as Greenblatt is a strong proponent of value investing and covers a variety of investment concepts throughout.  Moreover, I have used his chapter on trading spin-offs to generate a return in my own personal investing, which you can read about here, under featured posts.

You Can be a Stock Market Genius

 by Joel Greenblatt

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Peter Lynch (my favourite investor), similar to Joel Greenblatt above, earned his MBA from the Wharton School of the University of Pennsylvania and then began his career as an equity research analyst at Fidelity in 1969 after serving for two years in the United States Army.  By 1974, Lynch was made Fidelity's director of research, a role he would maintain until 1977 when he would take control of Fidelity's small and relatively unknown Magallen Fund.  

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In his book, One up on Wall Street, Lynch covers numerous investment ideas, examples, and his overall investment philosophy which enabled him to transform Magellen from an obscure investment fund, into one of the world's most successful and well-known funds when he stepped down as the fund's manager in 1990, as he managed to increase the fund's value to $14bn, while generating returns that made Magellen one of the best performing investment funds of all time.

One up on Wall Street

 by Peter Lynch

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The Intelligent Investor

 by Benjamin Graham

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Benjamin Graham, the father of value investing and mentor to Warren Buffet, is arguably the most important and influential individual in the world of investing.  

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Graham's book, The Intelligent Investor, introduces the fundamentals of value investing to a wider audience, compared to his more technical book Security Analysis.  This book is vital for anyone looking to understand value investing, as Graham explains some of the fundamental value investing concepts such as margin of safetyprice versus value, and investor sentiment, as well as many other key points.  Moreover, Graham describes his overall view of the stock market and why value investing is the correct approach to investing.

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