Isaac Newton famously said “If I have seen further it is by standing on the shoulders of Giants”, so is true for the ideas, portfolios and strategies at Capitalmind, none would have existed if it was not for the great minds, thinkers and researchers who have written about them.
As a tribute to all those giants, here’s a list of recommended readings by Capitalmind team. On understanding Financial Statements, Bottom up fundamental investing, Momentum, and Trend-Following, Market Cycles.
The six categories are representative of all that we do at Capitalmind.
We hope this list inspires you to explore the world of capital markets, and most of all helps you find answers to questions you’ve always had.
We’ll leave you with this lovely strip excerpted from the 11th episode of Carl Sagan’s legendary 1980s Cosmos series, titled “The Persistence of Memory”.
Disclosure: The links are affiliate links; if you click through here and buy, you still pay the best available price and we get a tiny referral fee.
Understanding Financial Statements
This book offers a fun way to understand financial statements. If you are new to investing & want to learn what goes in & out of company books, you should pick this one. In this book you will be starting a lemonade business. The author takes a step by step process to understand creating the financial statements from scratch.
How to read a financial report by John and Tage Tracy
This book is highly recommended for beginners and people not from the finance background. It is a 101 book on understanding financial statements
Damodaran on Valuation by Ashwath Damodaran
This is a go to book to understand financial statements. You can feel academic touch in his writings because of his profession. It’s a great resource to learn how to read the numbers & value a company on fundamentals.
Security analysis by Benjamin Graham
A century old, but still find its place in the list. Security analysis was Graham’s initial work. It is termed as a bible for understanding financial statements. Just like Damodaran on Valuation, this book also follows an academic way of teaching.
Financial Shenanigans by Howard Schilit
This book helps to find out if the financial statements are cooked or real. The author gives certain tricks & parameters to watch out for. One should have a fair bit of understanding the number before reading this.
Financial Statement and Analysis 4E by Stephen Penman
This book explains all the financial statements in depth, in addition it also covers important topics – like how do we interpret PE and P/B ratios, why does a company trade at a high PE and what does it mean when companies trade at less than 1 P/B
Value Investing
Intelligent Investor by Benjamin Graham
[Under ₹300]
It can be a crime to not name Benjamin Graham while talking about Value investing. He wrote his book during the crisis of the Great Depression in the US. The relevance of the valuation metrics and ideas in current markets is debatable. This book is termed as the Bible of value investing for a very good reason.
Margin of Safety by Seth Klarman
Seth Klarman is Hedge Fund manager of Baupost Group. He had generated a 20% CAGR since 2008 using the principles of Value investing. This book again is not in print right now. But we can check in the second hand market.
The most important thing by Howard Marks
[Under ₹300]
Howard Marks is also an Hedge fund manager of Oaktree Capital. He is specialised in distressed securities mainly on the debt side. However the principles aren’t different in the Equity world. In his book he mainly talks about the psychology one should cultivate while following value investing. A blissful read.
Value Investing & Behavioural Finance by Parag Parikh
As mentioned above, it is very rare to find an Indian investor who had written about markets. Late Mr. Parag Parikh had that ability to combine the value investing & behaviour finance in one book. He talks about human psychology, boom & busts of Indian markets
Value Investing – From Graham to Buffett and beyond by Bruce Greenwald
The biggest takeaway from the book is understanding the concept of valuing a company in 3 layers/tiers. The first is the value of the assets, the second valuing the earnings and sustainability of it, captured through the earning power value (EPV) and finally the growth prospects of the company.
Momentum Investing
This is a easy to read, well written book that explains the principles behind momentum investing, reasons as to why it works, it also compares it with value and growth investing. This is a must read for anyone who wants to understand how momentum investing works, and how to go about designing a strategy for yourself.
Stocks on the Move By Andreas Clenow
A good book to start understanding about Momentum. The author has written another 2 books including “Trading Evolved”, where he shows us how to build basic rules & systems in python. In this book he will tell us a step by step process to build a few momentum strategies.
You will notice Clenow, featuring in Trend following as well, that’s because he’s not a just a good fund manager he’s also got the gift making the complex, simple.
Dual Momentum Investing by Gary Antonacci
This book explains the basics like Relative & absolute momentum. He combines both in a single system & hence the name dual momentum. His 3 ETF system is simple & outperformed the indices.
Think and Trade Like a Champion by Mark Minervini
Classic books on the nuts and bolts of being a trader.
Trade like a stock market wizard by Mark Minervini
Trend Following
Following the Trend: Diversified Managed Futures Trading by Andreas F. Clenow
Not surprising that Clenow’s books features in both Trend following and Momentum recommended lists. He writes in a very simple, easy to comprehend language. This book has all you need to get started with designing a Trend Following system.
Do note, his focus in the book is more on ‘Diversified Futures’ space, i.e applying Trend Following strategies to multiple asset classes.
This book is almost like a textbook, covers almost everything there is to be discussed about Diversified Trend following, and with a special focus on how Trend following strategies perform during periods of crisis.
Growth Investing
Common Stocks and Uncommon Profits by Phil Fisher
[Under ₹300]
Termed as a father of Growth investing, Phil Fisher helps us to understand the valuing growth. He writes about the importance of growth for a company in the long run. He introduced scuttlebutt to the world of investing. He is famous for his investments in Motorola which he bought in 1955 & held until his death in 2004.
One upon Wall street by Peter Lynch
The star fund manager of Fidelity Investments from 1977 to 1990 during which he had generated a CAGR of 29.2%. He puts all his experiences in this wonderful book. He talks about how to value different companies like growth, value, cyclical, cigar butts, turnarounds etc. A joyful read.
The little book that builds wealth by Pat Dorsey
[Under ₹300 on kindle]
This book introduces us to the competitive advantage side of the companies. Why few companies grow for decades & why many can’t. Pat Dorsey talks about the Qualitative side of investing with relevant examples.
Of Long term value & Wealth creation by Bharat Shah
There are very few Indian investors who authored on the subject of Equity investing. Bharat Shah is one such guy who is an investor & authored a book called “Of Long term value & wealth creation”. In this book he talks about the qualitative side of investing, how to value great franchises & holding on to it for the long term. This book is out of print. Search out for a second hand book.
Portfolio Management
The Art of Execution: One of the few books that touches on the crucial aspect of managing your positions; winners and losers. Read our summary of the key takeways from the book: How the best investors deal with being wrong
General Reads
Mastering the market cycles by Howard Marks
Howard Marks featured again on the list. His latest book on Market cycles is a must read to understand how money flows from one asset to another. And how everything is cyclical in nature. He talks about how we should position ourselves & not get stuck in the wrong side of the game.
Capital Returns by Palgrave Macmillan
Capital Returns is another book which talks about Capital cycles. The author is a hedge fund manager from London. He does not talk about Value or Growth, but focuses more on “follow the money” to identify the next big trend.
Concentrated Investing by Allen Benello
[Under ₹300 on kindle]
This book is a summation of interviews of 4 investors who talks about concentrated investing style. In his book he talks about Lou Simpson & Kristian Siem. He focuses on nitty-gritty following concentrated portfolios.
Market wizards by Jack Schwager
In this wonderful book, he profiles some great investors like Richard Dennis, Paul Tudor Jones, Ed Seykota etc. He interviews these investors and tries to understand their investment styles & methodologies. Very good read.
Naked Statistics: Stripping the Dread from the Data by Charles Wheelan
Wheelan explains concepts of Statistics in a fun non academic way. Most of the concepts would find application in investing and trading system design.
Competition demystified – Bruce Greenwald and Judd Kahn
This is a book to understand the sources of competitive advantages that companies enjoy. It covers the qualitative aspects of looking at a business
Happy reading!
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