We asked five fund managers to tell us about their favourite investment-related books. Here's what they said
Fund managers don’t just dive into balance sheets, profits and loss statements and spreadsheets to understand how companies perform and industries work. These are the obvious sources of information, and all fund managers pore over them diligently. What makes fund managers different from one another is the way they analyse and understand the raw data. Besides, sometimes fund managers also need to look at how investments and funds are managed in other countries, especially in countries like the US where mutual funds industry is a more evolved one. Here, many fund managers with track records of 30 or even 50 years have written books in which their experiences are collated. These books are one of the sources from where domestic fund managers can draw fund management wisdom. Many fund managers, therefore, spend countless hours reading these books to understand more about how the world around them moves. Many of these books are written in a manner that you do not have to be a fund manager to understand them. All of us can read them and become better investors. Kayezad E. Adajania asked five fund managers to tell us about their favourite investment-related books. Here’s what they said:
Huzaifa Husain, head-equities, PineBridge Investments India
Warren Buffett’s annual letters to shareholders (1977 – till date)
Available on the website of Berkshire Hathaway. This is investment wisdom in its purest form from the master practitioner spanning four decades. Nothing ever written on investing comes close to this.
Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger
by Charles T. Munger
Walsworth Publishing Company | Rs7,000
In this book, one learns about how Munger proposes a synthesis of various disciplines to come to an investment decision.
How To Lie With Statistics
by Darrell Huff
W. W. Norton & Company | Rs923
Investing deals with numbers and hence to look at them with the right perspective is paramount and this book is a summary of the ‘bag of tricks’ employed by the peddlers of falsehoods.
The Dictator’s Handbook. Why Bad Behaviour Is Almost Always Good Politics
by Bruce Bueno De Mesquita and Alastair Smith
PublicAffairs | Rs900
Economic decisions are made in an environment constrained by politics. This book highlights the nature of ‘give and take’ in politics and points to the fact that this also dominates boardrooms of companies.
R. Sivakumar, head-fixed income, Axis Asset Management Co. Ltd
This Time Is Different – Eight Centuries of Financial Folly
by Carmen Reinhart and Kenneth Rogoff
Princeton University Press | Rs435.10
Investing is all about cycles, and the phrase ‘this time is different’ is almost always proved wrong. This book builds on Reinhart and Rogoff’s academic work and looks at 800 years of data to show that this time indeed is no different from others. The book is academically driven. For an easier and entertaining option, look at Manias, Panics and Crashes: A History of Financial Crises by Charles P. Kindleberger.
Fault Lines – How Hidden Fractures Still Threaten the World Economy
by Raghuram Rajan
Princeton University Press | Rs801.00
Several books that look at the 2008 financial crisis and its aftermath. This comes from one of the few economists who publicly called the bubble at its peak (and got called a Luddite for all that). For another angle, read Bailout Nation, with New Post-Crisis Update: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy by Barry Ritholtz, considered to be one of the investment world’s best bloggers and podcasters.
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
by Nassim Nicholas Taleb
Penguin | Rs258
We place far too much importance to near-term noise (such as short-term performance of portfolios) and ignore the longer-term signals. This book along with Black Swan, also by Nassim Nicholas Taleb, forces us to look beyond short-term volatility for what really matters to wealth creation.
The Little Book that Beats the Market
by Joel Greenblatt
John Wiley and Sons
The Little Book series are an easy read to get introduced to the concepts of investing. The Little Book of Common Sense Investing by John Bogle is an equally good and important read. For those not already in the investment world, these books are very useful.
The Best Investment Writing: The Best Investment Writing: Selected writing from leading investors and authors Volume 1
Edited by Meb Faber
Harriman House | Rs980
This book’s eclectic nature, thanks to the variety of authors, makes it a different read. I found that I might not agree with everything in the book, but it is nice to have your thoughts challenged by some of the best investment managers out there.
S. Naren, executive director and chief investment officer, ICICI Prudential Asset Management Co. Ltd
The Most Important Thing: Uncommon Sense for the Thoughtful Investor
by Howard Marks
Columbia Business School Publishing | Rs913
Howard Marks, chairman and co-founder of Oaktree Capital Management, describes his investment process here. He stresses that one needs to be counter-intuitive and develop second-order thinking to outdo the competition. He believes in the concept of cycles in sectors and that human psychology will not change and that our attitude towards risk will ensure that markets will always operate in cycles.
The Manual of Ideas: The Proven Framework for Finding the Best Value Investments
by John Mihaljevic
John Wiley &Sons | Rs1,452
A must read beginners to the world of value investing. It exposes the reader to nine different styles of value investing and details as to why they work, how they are used, how one can screen for stocks under different styles and what type of questions the reader should ask during the selection process.
The Little Book on Behavioral Investing
by James Montier
John Wiley & Sons
These books help the reader to identify various behavioural biases that clog investors’ minds, such as: self-attribution bias, confirmatory biases, overconfidence, and empathy gap.
It recommends to maintain an investment diary that can help us overcome the biases and learn from mistakes.
Why Moats Matter: The Morningstar Approach to Stock Investing
by Heather Brilliant and Elizabeth Collins
John Wiley & Sons | Rs2,128
The book is a representation of the investment process followed by global investment research firm Morningstar Inc. It is a good read for investors to help them identify strong businesses which can earn sustainable high return for a long period of time.
It identifies five major sources of competitive advantage or economic moats that are intangible assets, this includes: brands, patents or government licenses, cost advantage, switching costs, network effect and efficient scale.
The book is a compilation of 60 reports written between 2002 and 2014, by the investment manager Marathon Asset Management. It integrates investing with identifying the right sectors.
The main contours of the book are:
> Focus on supply side. Accurately predicting demand is a difficult task as there are too many variables to monitor. One has to focus on understanding the industry structure, the competitive conditions and the change in supply.
> Monitor capital follow. If too much capital is chasing a particular industry, it is difficult to make money as an investor.
> Classic economic theory teaches us volume growth can be achieved by reducing prices. However businesses that involve an agency can achieve both higher profit margins and sales volumes. In such structure, the customer is not directly involved in the purchasing decision. The higher price can be used to incentivise a purchaser’s agent to push sales and achieve the targets.
Prashant Jain, executive director & chief investment officer, HDFC Asset Management Co Ltd
Berkshire Hathaway Letters to Shareholders: 1
by Warren Edward Buffett
Explorist Productions | Rs8,990
This is a very valuable source of information and advice on both investing and life itself.
One up on Wall Street: How to use what you already know to make money in the market
by Peter Lynch
Simon & Schuster | Rs355
An informative and a good read from one of the most successful mutual fund managers. It has an easy to read style and is also fun to read.
Common sense on mutual funds: New imperatives for the intelligent investor
by John C. Bogle
John Wiley & Sons | Rs2,474
This is a very good book to read for all those who invest or would like to invest in mutual funds. But it needs to be read slowly and patiently.
Harish Krishnan, senior vice president and fund manager – equity, Kotak Mahindra Asset Management Co. Ltd
by Edward Chancellor
Palgrave Macmillan| Rs1,786
This book features investment notes of Marathon Asset Management. It focuses on the supply dynamics of firms and can help long-term investors understand business cycles, and help them in capital allocation calls to various industries—as they move from boom to bust, and back again.
Creativity Inc.: Overcoming the Unseen Forces That Stand in the Way of True Inspiration
by Ed Catmull, with Amy Wallace
Transworld Publishers | Rs402
Intuition, creativity and the processes at any organization are always at odds with each other. This book describes how Pixar Animation Studios created an internal structure that is a foundation for the creative output of its employees. This book will help a investment professionals to create tools and organization structures that can maximize ideation, while optimizing the success ratio of the various investment ideas.
*Price of books is indicative and varies across e-commerce platforms and book formats