Top 7 Underground Value Investing Books

Every year brings 80 or 90 new value investing books from fifth-rate fund managers and analysts that haven’t seen a promotion since the Bush presidency.  Among the normal buy quality at a low-price drivel are some true hidden gems.  Here are my favorites.

The Entrepreneurial Investor

Kinkos founder Paul Orfalea used the money he gained selling Kinkos to seed a value-based hedge fund called West Coast Asset Management which has since acquired by something called Lucia.  Anyway, in the book the four authors teach how to focus on businesses and analyze things like culture in your investing.  Plus, it’s only 170 pages.

The Intelligent Option Investor

This one has been one of my favorite reads over the past year or so.  Kobayashi-Solomon starts with the basic of options and teaches investors how to use implied volatility to find the expected and high and low prices of a stock over the term of the option and then value the stock and compare it to the implied volatility.  Where the valuation is higher than the option implies the options is worth purchasing.

Trade Like Warren Buffett

I try to get James Altucher’s take on Warren Buffett into book lists every few months.  Especially now that he’s constantly bagging it on Twitter and in his podcasts.  Altucher works through the various arbitrages Buffett has taken advantage of (fixed income, relative value, merger and closed-end fund), private investments in public equities and all kinds of other fun stuff.

Applied Value Investing

Applied Value Investing is the investing book that has most surprised me with its greatness.  Calandro went to a Bruce Greenwald seminar at Columbia and uses Greenwald’s asset value and earnings power valuation technique to produce case studies of various Warren Buffett and Eddie Lampert investments.

But that’s not all!  He also integrates typically incomprehensible George Soros investment theory with Austrian Business Cycle Theory to create a framework for following and predicting business cycles.

Mosaic: Perspectives on Investing

Mosaic is a collection of the article Mohnish Pabrai wrote in the early days of his hedge fund when he was returning something like 25% annually.  The articles are well written and have each been read by me at least 14 times.  Perfect for short reading, like in waiting lines, on a bus or during a BM.

The Investment Checklist

Most value investing books suffer from too much commentary and too little actionable information.  This book is the direct opposite.  The entire book is a voyage through the author’s investment checklist (imagine that).

Invest like a Dealmaker

Chris Mayer has been one of my favorite investment writers since about 2007.  His typical investment is an asset heavy and low-debt business run by an owner-operator.  The so-called dealmaker’s ratio in this book is anticlimactic (it’s just EV/EBIDTA), but the collection of writings at the end about various investors and strategy is well worth the price.

Bonus: How to Hack Wall St.

You can’t get more underground book than my first which has sold something like 37 copies.  I talk about all kinds of exciting special situation strategies and create a portfolio that I still follow to this deal.  Buy seven copies!

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