Value investing is a very popular concept among the investors’ community. It is an investment strategy where stocks are selected below their intrinsic values. Value investing principle does not depend on market news or short term stock movement based on the news. The value investors find stocks which they believe is undervalued or not properly priced in the market according to the strength. Investors buy the stock and keep it for a longer term.
There are various books, blogs, journals, community across the web which discusses value investing. You must have heard the name of renowned investor Warren Buffet who is a value investor. Here I have shortlisted 7 best value investing books which strengthens your idea of value investing.
If you wish to enter to the stock market but don’t know how to start I will recommend you to read my other article How to start investing in the stock market – A step by step guide for beginners.
Best Value Investing Books in India for Beginners
# The Little Book on Value Investing
The little book on value investing by author Christopher H. Browne is the part of the little books Big Profits Series. Christopher Browne was the son of Howard Browne, one of the partners of brokerage firm Tweady, Browne and Reilly. The well-known value investor Benjamin Graham was one of the firm’s primary customers. Later Warren Buffet also became a brokerage client of this company in 1950. The author spent 40 years in this company and published this book in 2006.
The book beautifully describes the importance of value investing. The author wrote about the principle of value investing and how you can choose a value stock in this book. He has introduced the intrinsic value of a stock which means the underlying value of a stock.
The intrinsic value is different from stock price. The book value of the stock will help you to check the intrinsic value of the stock. You will have a very good idea of the intrinsic value when you read this book.
The entry and exit are very important for investing in stock. Everybody wants to buy low and sell high to make profit. So mastering the art of buying cheap and selling high is highly important for stock market investors. The author emphasizes buying of low P/E stocks of high growth companies.
The author says that value investing requires more effort than brains and lot of patience. This book is ideal for the beginners who want to start investing or want to know the fundamentals of value investing. The book is very helpful to the investors who are struggling in the market and continuously searching for a strategy or method to be a successful value investor.
# Value Investing and Behavioral Finance
This is a masterpiece from Mr. Parag Parikh, the great investor cum entrepreneur. Choosing a value stock when it is low priced with enormous potential, is a very difficult task for a common investor. The investors’ behavior is commonly influenced by two primary emotions, greed and fear.
This book shows how the investors’ behaviors affect the investment decisions. He also told from his rich experience that how those investment decisions led to poor returns and other market movements.
The author says the objective of every equity investor should be to identify great companies with sound management which are trading at reasonable valuations. This book looks at the various concepts of behavioral finance and their applicability to Indian stock market.
The book also talks about the failed IPOs such as Reliance power and DLF with respect to the behavioral aspects of promoters as well as investors perspective. The author pointed out that investors forget history and make the same mistake. This is because of the demographic shift where the new investors come and make the same mistake as made by their seniors.
This book is well structured through its 12 chapters taking the reader through the behavioral impact on various aspects of Indian equity markets.
The author also set the correction and figured out how to create long term value and set investment strategies based on the principle of behavioral finance.
# The Dhandho Investor: The Low-Risk Value Method to High Returns
Dhandho is a Gujarati word which means enthusiasm that creates wealth. The investors who get low risk and high return can be called as Dhandho. The author Manish Pabrai is a US based fund manager and also a value investor. He advised to invest in the stocks which have been hammered by negative news and it is beaten to a very low price even the negativity is not so much. He advised buying those stocks until they recover it.
The author has explained the Dhandho approach with examples such as Lakshmi Mittal. He buys steel plants in distressed economic conditions across the world. Steel is considered as an unattractive business to many businessmen. Mittal was able to buy some steel plants in a very cheap valuation and turned them back to a profitable company.
In the same way, the author suggested buying stocks which are at deep discount. He also suggested holding the stock for 18 months to 3 years to get the benefit. He likes to buy stocks which has price of 50% of its intrinsic value and sell it when it approaches 90 to 100 % of intrinsic value. If the stock is not reaching to the expectation its better to drop the stock as it is a wrong selection.
# Intelligent Investor: The classic text on value investing
The intelligent investor by Benjamin Graham is probably the best book in the value investing arena. The book was written long back in 1949 but the principles still sound good and applicable to the stock market investing. The great value investor Warren Buffet considers him as a master of Value Investing and called this book as the best book on value investing ever written.
The investing does not need a great IQ, business mind or inside information. You need a sound idea which excludes emotions while selecting the stock. This book beautifully describes this idea to the readers.
This book has a number of great concepts and a must read for all the stock market investors. The book describes the general concepts and slowly takes you through the analyzing the stocks by balance sheet, cash flow etc. You will also know about various strategies along with management, dividend policy.
Though this book is somewhat difficult to read and understand but if you are able to go through it you can have your much-needed insights on value investing principles.
Personally, I prefer to read the books from Indian authors which is easy to understand and can be co-related in the Indian context. You can also read five Best stock market books for beginners by Indian authors.
# Value Investing from Graham to Buffet and Beyond
As the name suggests this book written by Bruce Greenwald is on value investing. The book covers overview, what is value investing and examination three specific approaches of value investing with various case studies.
The little book on value investing is a good book for the introduction on value investing. This book continues the value investing principles from that book and carries on with various tools to assist in the practice of value investing.
This is a great intermediate level book for the new value investors. It describes the discounted cash flow analysis and introduces you to an understanding of how and where to find value.
The author explores the different approaches of the eight great value investors of all time such as Warren Buffet, Mario Gabelli, Glenn Greenberg, Robert H. Heilbrunn, Seth Klarman, Michael Price, Walter and Edwin Schloss and Paul D. Sonkin.
You will find how to construct a well balanced portfolio to reduce risk over and above the margin of safety for individual stocks.
# One up on Wall Street
Peter Lynch is a legend on investing arena and also a good writer. His book one up on Wall Street focuses on the idea that depends on observations on your day to day life. You can make investment decisions according to the small observations such as which products are getting popularity in your area or what business is growing. Lynch pointed out that the extraordinary return of even one stock in your portfolio can make your overall portfolio a good return.
The book focuses on key point which is to ignore the analysts and experts and not to follow recommendations given on TV channels. Also don’t try to time the market or predict the economy. Rather you focus what you already know. Look at the companies and industries you already know something. Listen to the people surrounded what they are talking about. Take the reference from them and interpret the opportunity.
The author advised the investors to do their own research before investing. You can observe from your daily life about good businesses which everybody talks about. Then you need to do a bit of research about the company. You have to know about balance sheet, management team, similar companies and the future growth plan of the company. The book also describes further the buying and selling points.
The author explained that the market gives you the opportunity to buy the stock when it is on sale. Take advantage of that sale.
Patience is the key to investing. Many times we are in a hurry to book profits. This should not be the approach. You have to own the business rather than a stock. The author is very clear in the statement that doesn’t invest in a company unless you have a compelling reason to invest.
# The Art of Value Investing: How the World′s Best Investors Beat the Market
The art of value investing is a collection of interviews of great value investors. The book is full of invaluable insights and is relevant to both beginners and experienced investors. The book describes various topics such as
- What is value investor
- Geographic areas and industries
- How to take advantage of Market inefficiencies
- How to generate ideas on selecting companies
- Decision of buying and selling and holding a stock
- Margin of safety etc.
The question and answer format makes the book more enjoyable while reading. You can easily understand the way the author wrote the book. This book also discusses investing style and their evolution. Such as Warren Buffet’s style evolution, a function of both growths in assets and partnership with Charles Munger. Buffet evolved from buying stocks of small cap companies with high-quality management to large cap companies with high-quality management with strong franchises.
The scope of value investing which is described in this book is remarkable. The book covers diversity and concentration, risk and modeling, behavioral investing, macro and microeconomics, short vs long term investing.
I am sure you will enjoy this well-organized book on value investing.
I have shortlisted these 7 books on value investing which is going to help the beginners as well as experienced investors. In my view value investing has immense potential but yet to be explored. We want quick money which contradicts the value investing principles. The patience is the key for value investing along with buying of stock at the right price. Most of us lack that skill. These books will help you to grab those skills which are required for value investing and make you rich.
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