To your

Forbes - - Thought Leaders -

Forbes Cruise for In­vestors (we have two in 2016, so sign up now as a Christ­mas present to your­self and loved ones), FORBES colum­nist and self-made bil­lion­aire Ken Fisher said it’s vi­tal to keep your in­vest­ing for­mu­las fresh.

Things change, and so must in­vestors. Sim­ple con­trar­i­an­ism is no longer fail-safe. Mo­men­tum in­vest­ing has be­come a huge op­pos­ing force, driven by fund man­agers un­der pres­sure to meet quar­terly per­for­mance goals. High stock prices can and do go higher. Low ones can go lower. Un­less you have deep pock­ets, the mar­kets will hap­pily out­last your good old Ben­jamin Gra­ham-type com­mon sense.

War­ren Bufett evolved from his early Gra­ham in­fuence. In the 1950s and 1960s he would spend the day read­ing Stan­dard & Poor’s re­ports. His near pho­to­graphic mem­ory for num­bers and nat­u­ral abil­ity to see cor­re­la­tions and anom­alies let him fnd the nee­dles in the haystack. But tomorrow’s Bufett won’t be able to start the same way. Com­put­ers and soft­ware have made the unique skills of the 1950s Bufett avail­able to ev­ery­one.

In the 1970s the Or­a­cle of Omaha be­gan to think more about brands, moats and free cash fow as com­pet­i­tive edges. Yet he didn’t aban­don his Gra­ham dis­ci­pline on prices; he added to it. With Berk­shire Hath­away as his ve­hi­cle Bufett had an ex­panded for­mula: Use the free cash fow from the in­sur­ance com­pa­nies and other in­vest­ments to buy—at Gra­ham dis­count prices—busi­nesses that have nat­u­ral mo­nop­o­lies owing to brands and moats.

Fi­nally, as he grew more worldly and wise, Bufett be­gan to put more weight on the qual­ity of the man­agers within his Berk­shire em­pire. I doubt the young Bufett, who sat at a desk mem­o­riz­ing S&P re­ports, was as ca­pa­ble of judg­ing man­age­ment tal­ent as he later be­came.

Ken Fisher told the Forbes cruis­ers that con­trar­ian in­vest­ing still works, but you have to look harder to fnd anom­alies and in­vest­ment edges that the world’s fund man­agers, with their mighty su­per­com­put­ers and al­go­rithms, have over­looked. This is difcult work that re­quires con­stant ed­u­ca­tion, evo­lu­tion and the erad­i­ca­tion of emo­tional bi­ases.

With that in mind, here’s a Christ­mas list of in­vest­ment and busi­ness books—some clas­sic, some newer—that may help you fnd your in­vest­ment edge.

com­mon Stocks and Un­com­mon Profts— by Philip A. Fisher (John Wi­ley & Sons, $24.95). Les­son: Do the fnan­cial anal­y­sis. But also talk with peo­ple who know your po­ten­tial in­vest­ments, in­clud­ing cus­tomers, ven­dors and com­peti­tors. the Lit­tle Book of com­mon Sense In­vest­ing— by John C. Bogle (John Wi­ley & Sons, $24.95). Beat­ing the mar­ket is a full-time job, and few con­sis­tently win. Buy Bogle’s book, fol­low his di­rec­tions and get some sleep. Pre­dictably Ir­ra­tional— by Dan Ariely (Harpercollins Pub­lish­ers, $15.99). Ev­ery­one thinks they are ra­tio­nal thinkers, but few really are. This book ex­plains how to spot emo­tional bi­ases in your­self and oth­ers. the In­no­va­tor’s Dilemma— by Clay­ton M. Chris­tensen (Harper­busi­ness Es­sen­tials, $17.99). This 1997 clas­sic re­mains the book on dis­rup­tion and why star­tups of­ten dis­lodge en­trenched, proftable com­pa­nies. Al­though this isn’t writ­ten as an in­vest­ment book, it nev­er­the­less puts a dag­ger into pure value in­vest­ing. Why? Cheap com­pa­nies don’t al­ways bounce back. The only quib­ble I have with Clay’s book is that in the years since he wrote it, rich and pow­er­ful com­pa­nies such as Ap­ple and Ama­zon have learned to be dis­rup­tors, too. Get­ting things Done— by David Allen (Pen­guin Books, $17). This book on stress-free pro­duc­tiv­ity will keep you on an even keel. Zero to One— by Peter Thiel and Blake Mas­ters (Crown Busi­ness, $27). How great dig­i­tal en­trepreneurs and in­vestors think. Thiel is both. Knowl­edge and Power— by Ge­orge Gilder (Reg­n­ery, $27.95). Knowl­edge is ev­ery­thing, and the mar­ket has caught on. Gilder’s frame­work is spot-on when it comes to as­sess­ing which com­pa­nies and coun­tries are mov­ing the fastest to­ward greater knowl­edge and knowl­edge ap­pli­ca­tion. re­viv­ing amer­ica— by Steve Forbes and El­iz­a­beth Ames (Mcgraw-hill Ed­u­ca­tion, $26). Amer­ica faces many prob­lems, but most of them will re­cede or van­ish with faster eco­nomic growth, higher real em­ploy­ment and a more widely shared pros­per­ity. This is the blueprint.

Have a happy hol­i­day and a pros­per­ous New Year!

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.