Investment Books

Loyal reader Kenneth MacDonald writes to ask for advice on investment books.  I’m a fan of A Random Walk Down Wall Street, but the bottom line there is pretty simple–diversify, buy and hold, and avoid high fees.  Ken is looking for “a more focused book on how to research stocks,” something that explains P/E ratios and other fundamentals that can be used to look for value.  So to answer Ken I turned to two more knowledgeable investors:

Felix Salmon is also more of an index fund guy but for those willing to bear the risks he recommends the classics:

Bartley J. Madden has a wealth of experience in investing and is unusually analytical.  He developed the cash-flow-return-on-investment valuation model which is widely used around the world today.  His recommendations are:

  • Equity Valuation edited by Viebig (“…an excellent overview of valuation models used by institutional
    investors.  The section written by David Holland and Tom Larsen is a
    particularly useful and up-to-date technical explanation of the CFROI
  • Driven: Business Strategy, Human Actions and the Creation of Wealth by Litman and Frigo (“…a very good job of linking business strategy to long-term levels and changes in stock prices.)

For an advanced treatment of the CFROI model I’d also recommend Bart’s own book Maximizing
Shareholder Value And The Greater Good
(free download here).  Readers?


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