In this article, I give three investment books that have really shaped my investment philosophy.
I indicate what ideas I have taken from these three books and shortly also which ideas I got from a few other books on investing.
My investing was shaped by many more non-investment books but that is for a later article. I hope you enjoy this one.
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Alina Rosanova/iStock via Getty Images Introduction
I have been asked quite a few times what were the books that have shaped my investing the most. In this article, I will give you the three most important books that have shaped my investment style.
Instead of just giving a long list of books, I decided to focus on these three to show you what elements exactly have influenced me.
I have read much more books but they didn’t strike a chord with me. An example is A Random Walk Down Wall Street by Burton Malkiel, which I really didn’t like at all. I have read it completely, but I found that he influenced me to do the exact opposite of what he advises. That means I didn’t buy an index fund and I’m showing with my picks that it is possible to beat the market average.
Some books I really liked but that I don’t consider pure investment books are The Psychology of Money by Morgan Housel, Where Are The Customers’ Yachts? by Fred Schwed Jr. and Dollars and Sense by Dan Ariely and Jeff Kreisler, for example.
But without further ado, let’s dive into the three investment books that have influenced me the most as an investor. Common Stocks and Uncommon Profits – Philip Fisher
If Benjamin Graham is the dean of value investing, Philip Fisher is the father of growth investing. This book was published in 1958 but after 63 years, it’s still as relevant today than when it was published. This book has really shaped a lot of what Potential Multibaggers is all about.
Fisher is the first to focus on fast-growing companies, and at the same time, he has a really long-term focus, saying the best time to sell a stock is “almost never” long before Warren Buffett said his preferred holding period is forever. Buffett called Common Stocks and Uncommon Profits a ‘very, very good book’ in the 2018 Berkshire Hathaway ( BRK.A ) ( BRK.B ) annual shareholders meeting.
Fisher insists on deep research. In his days, that was through the scuttlebutt method. Later, it was also called the mosaic theory. It means that you collect as much publicly available information that if you put the pieces together, you see something that other investors don’t see, the bigger picture as it were.
Fisher asks 15 questions and I’m sure you’ll recognize several if you have read any Potential Mulitbagger deep dive. I’m not going to list them all here but you can Google them, or, even better, read the book. But Fisher insists on growth potential, the quality of the management, innovation and research and development, long-term perspective of the company, scalability, sales execution, company culture and other themes that still matter so much today. Reading Common Stocks And Uncommon Profits was a turning point in my investing. 100 Baggers – Chris Mayer
All Potential Multibaggers stocks are very volatile. That is inherent for fast growers. If you have read the outstanding book 100 Baggers by Christopher Mayer, you know that 100 baggers, stocks that go up 100 times or more, regularly have really big drops. All of the 100-baggers he looks at suffered periods where the stock plummeted 50% and more, most several times and most much more than 50%. Owning just one 100-bagger can really change your life. A $10,000 investment that becomes $1,000,000, that’s life-changing. Chris Mayer identified 365 stocks since 1972 that are up more than 10,000%. This is how long you need with different time periods to get there: Growth per year Years to 100-bagger status 14.1% 35 years 16.6% 30 years 20.2% 25 years 25.9% 20 years 35.9% 15 years 58.4% 10 years ( Compiled by From Growth To Value )
While 58.4% annually for 10 years is, as most investors will agree, extremely hard to get, Monster Beverage ( MNST ) did it. 14.1% per year seems more feasible but you have to hold for a long time then. It shows that the difficult thing […]