Education of an Investor
This post is to put up a reading list of what should be read (AND understood) to become a direct equity investor.
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@vineetr pointers?
1. One up on Wall Street; Peter Lynch
2. Common Stocks and Uncommon Profits; Philip Fisher
3. The Manual of Ideas; John Mihaljevic
4. Expected Returns; Antti Illmanen
5. The Bank Investor's Handbook; Nathan Tobik and Kenneth Yellen. To understand how to value banks and NBFCs.
6. Industry primers from Fisher investments; http://fisher-investments-press.wiley.com/ available on Amazon India as Kindle ebooks. Recommended for broad and deep understanding of various industries
7. Margin of Safety; Seth Klarman. You need to find some PDF copy of this, since the original is no longer published and is expensive to procure
8. Accounting; Peter J Eiesen. To get a beginner-ish understanding of accounting, and to understand financial statements.
9. Financial Statements; Thomas Ittelson. To focus only on understanding financial statements
What about Accounting for Value by Stephen penman?
Havent read that
No accountancy book?
Barron's accounting, by Peter Eisen. Adding it.
Its not comprehensive though. Just beginner level. One may need intermediate accounting knowledge to understand nuances of revenue recognition
so basically, this is more of a Growth / Quality companies investment, rather than Graham style value investing (except for maybe Klarman's book).
Yeah, that style of investing hasn't done well against growth style for a long time. Select fund managers may be successful, but its tough to replicate their success.
do you do more of a Coffee Can portfolio (=low turnover, buy and stick, rather than jump in and out)? of course, the investing thesis has to stay for the stock to remain in the portfolio.
Phil Fisher was kind of this guy (even majority of Berkshire Hathway is like that).
Jump in and out can be for selective stocks, like special situation plays. Special situations are among the easiest ways to make money without taking a lot of risk.
Buy and hold makes sense for those picks that have a very long runway. They maybe cyclical changes in market perception and valuation of these companies, so it doesnt make sense to completely exit. However, frequent portfolio sizing needs to be done, irrespective of investment style. You may end up selling a portion of holdings in a buy and hold story, just because valuations don't give a comfort factor.
Peter Lynch's valuation analysis. Very simplistic. I use it for napkin analysis of the stock price, since its very simple to do. https://www.youtube.com/watch?v=qxFgUGixDxQ
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Unknown User•5mo ago
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I dont think that is a good screen. It substitutes profit growth for future EPS growth. It's close, but can be misleading, so it becomes a matter of subjectivity on how sustainable the current profit growth is on a future basis.
There are a few other things that are superfluous in the screen. A simplified one would look like:
Market Capitalization > 500 AND Market Capitalization < 15000 AND ((Profit growth + Dividend yield)/ Price to Earning) > 1If you want to filter out more companies to give you a more focussed list to start, then you'd compare ((Profit growth + Dividend yield)/ Price to Earning) against a higher value, like ((Profit growth + Dividend yield)/ Price to Earning) > 3 Once you look at the companies getting filtered out, you'll find that profit growth variable is the one causing a large number of companies to pop out of results. A lot of companies have last 12 months of profit growth in the range of 1000% or more. Possible, but then you have to start worrying about whether these are cyclical turnarounds like how Lynch classifies them, or something else. Now you see why its better to have an EPS growth estimate instead - its rare for anyone to put an EPS growth estimate of 1000%+. If you just want better quality companies to be filtered and retained in the result, just add a clause for ROE or ROCE, ideally check if they are greater than 20% or more. The list now becomes more manageable.
Market Capitalization > 500 AND Market Capitalization < 15000 AND ((Profit growth + Dividend yield)/ Price to Earning) > 3 AND Return on capital employed > 20
Unknown User•2mo ago
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