I started investing about 10 years ago. I tried my hands on almost everything. From CFDs, to forex trading, to even sports betting. It was somewhere in 2013/14 that I came across my first book on Value Investing. It was like a “eureka” moment for me, everything in that book just made sense and I was immediately hooked.
Aside from this book, I went on to read another 2 more books on value investing. Perhaps because I was still a beginner. But these books are very informational but easy to digest at the same time. Here are the 3 books that got me started in value investing.
Value Investing for Beginners by Ken Chee
This book was passed to me from a friend, who bought his book after attending his value investing course. It was the first book that I read on value investing. As the name suggests, this is a book meant for beginners who want an insight into how value investing works. My first thought after reading this book was “It just made sense”. I bought into the whole value investing idea and the rest is history.
“Value Investing for Beginners” was written by Ken Chee, now Executive Chairman of 8I Holdings Limited. This book aims to provide a comprehensive introduction to value investing, an investment strategy that involves identifying undervalued companies and buying their stocks in the hopes of realizing a profit as the company’s value increases over time.
The book begins by explaining the principles of value investing and how it differs from other investment approaches, such as growth investing or momentum investing. Ken then goes on to discuss how to identify undervalued companies, including the use of financial metrics such as price-to-earnings ratio, price-to-book ratio, and dividends. He also covers the importance of conducting thorough research and analysis before making any investment decisions, including considering a company’s management, competitive advantage, and growth potential.
Throughout the book, Ken provides examples and case studies to illustrate how value investing principles can be applied in practice. He also offers practical tips and strategies for building a successful value investing portfolio. He also addresses common pitfalls and challenges that investors may encounter, and provides guidance on how to mitigate these risks.
What I like about this book
Overall, “Value Investing for Beginners” is a comprehensive guide to value investing that is suitable for novice investors looking to learn about this popular investment strategy. It offers a clear and concise introduction to value investing principles and provides valuable insights and guidance for building a successful portfolio. What I really like about this book is the examples that it provided are companies listed on the Singapore Exchange. I am familiar with the companies mentioned and being relatable to these companies adds icing on the cake. This book ignited the spark in me and I became motivated to find my own set of “undervalued” companies.
The Manual of Ideas by John Mihaljevic
I then searched for other literatures on value investing to get investment ideas. Through online search, I was recommended this book.
“The Manual of Ideas” is a book written by John Mihaljevic. It is a book that aims to provide a framework for evaluating investment opportunities and making informed investment decisions. The book is based on the concept of “idea generation,” or the process of finding and evaluating potential investments based on a variety of factors such as company fundamentals, industry trends, and macroeconomic conditions. It also discusses on the 9 investment strategies value investors can use.
9 Investment Strategies
- Deep value – Ben Graham style bargains
- Sum-of-the-Parts value and investing in companies with hidden or excess assets
- Greenblatt’s magic companies and the search for good and bad stocks
- Jockey stocks and how to make money in tandem with great managers
- Finding opportunity in super-investor portfolios by following the leaders
- The opportunity prevalent in underfollowed small- caps and micro-caps
- Decoding opportunity in event-driven investments and special situation
- Speculation and investment in leveraged companies
- Searching for value beyond home country borders
Mihaljevic provides examples and case studies to illustrate how these strategies can be applied in practice, and offers guidance on how to identify and evaluate potential investments based on these strategies.
One of the key themes of the book is the importance of conducting thorough research and analysis before making any investment decisions. Mihaljevic advises readers to look beyond traditional financial metrics and consider a wide range of factors, including a company’s management, competitive advantage, and growth potential. He also emphasizes the importance of identifying and mitigating risk, and recommends diversifying investments to reduce the impact of any individual investment that may not perform as expected.
What I like about this book
I love the way it provides a structured approach to evaluating potential investments and how it offers valuable insights and guidance for making informed investment decisions. This book is a comprehensive guide to idea generation and investment analysis for both novice and experienced investors.
The Little Book That Beats the Market by Joel Greenblatt
Of all the ideas presented in “The Manual of Ideas”, Joel Greenblatt’s Magic Formula intrigues me the most. For those that have not read this book. The Little Book That Beats The Market by Joel Greenblatt introduces the magic formula for excellent companies. The magic formula is based on the idea that the best investments are those that are both undervalued and have strong earnings potential. He used two financial ratios to determine these qualities in companies:
1) the earnings yield (E/P)
2) the return on capital (ROC).
The book begins by explaining the basic principles of the magic formula and how it can be used to identify potentially attractive investments. Greenblatt then provides examples and case studies to illustrate how the magic formula can be applied in practice. He also offers guidance on how to use it to build a diversified portfolio of stocks.
Throughout the book, Greenblatt emphasizes the importance of discipline and patience in investing, and provides tips and strategies for managing risk and avoiding common pitfalls. He also discusses the role of market efficiency and the limitations of the magic formula, and advises readers to use it as just one tool among many in their investment toolkit.
What I like about this book
When I first started out on my investing journey, I used the “magic formula” to search for potential companies for research ideas. I managed to expanded my circle of competence by doing research on these companies and the industry they operate in.
There is a website that uses the magic formula to screen for stocks. You can find it here.
https://www.magicformulainvesting.com/
This website is a very important source of investment ideas to me when I first started out.
Conclusion
Books can be a useful resource for investors looking to learn about different investment strategies and approaches. It also helps in idea generation. Investors should read more to gain a better understanding of the principles and practices of various investment strategies and how they can be applied in practice. Books can also provide valuable insights and guidance on how to conduct thorough research and analysis before making any investment decisions, as well as tips and strategies for managing risk and building a successful portfolio.
In addition, many books on investing provide examples and case studies to illustrate how different strategies and approaches can be applied in practice. This can be helpful for gaining a real-world understanding of how these concepts work. Reading books can also be a helpful way to stay up-to-date on industry trends and developments. Books can provide a source of inspiration and ideas for finding and evaluating potential investments.