While I hope 2021 brings along a lot of improvement, it seems likely we have at least a few months to lay low and hunker down before life returns to normal.
Between New Years resolutions, winter weather, and the coronavirus, there has never been a better time to have a goal of reading more.
If you need helping determining what to read in 2021, here are the most popular books from our readers in 2020. Topics range from stock market history, to financial statement analysis
Top 10 Investing Books for 2020
In 2020, Begin To Invest had right around 250,000 readers. Here were the most popular books ordered through our affiliate links (See disclaimer):
#10 – Warren Buffett and the Interpretation of Financial Statements – The search for a company with a durable competitive advantage
Understanding a company’s financial statements is incredibly important for an investor. But, books on the topic are not always the most exciting.
This book takes an interesting twist on evaluating a company’s financial statements – Looking at these statements through the eyes of Warren Buffett.
Besides just defining terms, the book uses specific examples from the financial statements of companies that Buffett invested in. The book is full of short, concise chapters that will get you well on your way to better evaluating a company’s financial statements.
At last check, copies of the book are available for about $13 on Amazon.
This book was also inspiration to our blog post here:
Evaluating Stocks with a Competitive Advantage – Warren Buffett’s Concept of an “Equity/Bond”
#9 – The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron
Those who are regular readers know this already, but I feel that one of the best ways to become a better investor is to read about and learn about the history of the stock market.
If you want to study about the rise and fall of some of the world’s most valuable businesses – Where better to start than with Enron?!
I’m not alone in this opinion by the way. Here’s some advice on how to become a better investor by someone a little more famous than me – Charlie Munger:
“Business Schools fail by teaching what is easy to teach but less useful. Going back to teaching business history as Harvard used to would be good; there’s a lot to be learned from the rise and fall of GM, or the rise and fall of railroads.”-Charlie Munger
At one time Enron was known as “the world’s greatest company”, and fortune magazine called it “America’s most innovative company”.
Billions of dollars were made investing in Enron – From individual investors to some of the best stock analysts in the world. Almost everyone viewed Enron with envy.
But of course, that would not last. The Smartest Guys in the Room is one of the best books that detail the story, and the inner workings, of Enron. From the corporate boardroom to Muldoon’s – A hole in the wall bar in Houston where Skilling spent many of his final nights as a free man.
This book is also a source for many of our “This Day in History” posts regarding Enron. For example: April 17th, 2001 – A day now known simply as “Enron Day”, when CEO Jeff Skilling called an analyst an asshole on a public earnings call. Read more here:
April 17th – This Day in Stock Market History
#8 The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
This book takes a look at 8 companies that had stellar returns for their shareholders, and goes into detail about how these companies where run.
You may not be surprised to know that many of these companies were ran quite different than normal.
Take for example Tom Murphy and Dan Burke, who ran Capital Cities from the mid 1960s, until it was sold to Disney for $19 billion in 1995.
Murphy and Burke built a decentralized conglomerate by buying up broadcast studios across the country. (Its most notable acquisition was purchasing ABC in 1985)
Warren Buffett would call the duo:
“probably the greatest two-person combination in management that the world has ever seen or maybe will ever see.”
Capital Cities investors would probably agree as well:
We reviewed a couple chapters of the book in a previous blog post, here:
2 Qualities that Make a Great CEO
#7 Stress Test: Reflections on Financial Crisis
I personally really enjoyed this book, though it surprised me to see it on this list.
Tim Geithner was the secretary of the Treasury during the 2008-2009 financial crisis, and the president of the New York Federal Reserve before that.
Needless to say, he had a front row seat to the financial crisis as it unfolded.
What I liked about this memoir was how educational I found it to be. Geithner does a good job explaining the workings of fiscal and monetary policy, along with the specific failures of our financial infrastructure during 2009.
Besides the 2008-2009 crisis, Geithner also details his experience during his previous work during past periods of crisis, such as the “Asian Flu” that hit in the late 90s.
While I found the historical view of the crisis interesting, where I think this book provides more value is how it improved my knowledge of the inner workings of our financial system.
#6 Conspiracy of Fools: A True Story
“From an award-winning New York Times reporter comes the full, mind-boggling true story of the lies, crimes, and ineptitude behind the Enron scandal that imperiled a presidency, destroyed a marketplace, and changed Washington and Wall Street forever.“
This book is great along with The Smartest Guys in the Room, #9 above. This book gets a little more into the financials of Enron, which I enjoyed.
I will spare repeating myself on the importance of understanding the history of large frauds like Enron to become of a successful long term investor. Needless to say, whether it be this book or The Smartest Guys in the Room – you will not regret reading through either one.
#5 Competitive Strategy: Techniques for Analyzing Industries and Competitors
I think this is one of the best books for those looking to get “beyond the financial statements”.
Yes understanding a balance sheet is important. But today’s market is perfect evidence that there is more to investing than looking at a simple P/E Ratio.
In this book, Porter looks at what is commonly known as a company’s “Competitive Advantage”. This can be thought of as what makes a company unique, and worth of your long term investments.
For example, if you were researching whether or not to invest in a specific company today, a primary consideration might be how long the company can keep its dominant position compared to its peers. This is called a company’s “Barrier to Entry”.
What goes into a company’s barrier to competition? Porter gives a few ideas:
- Economies of Scale
- Product Differentiation
- Capital Requirements
- Switching Costs
- Access to Distribution Channels
- Government Policy
Sounds like a lot right? Well don’t worry, the whole book is Porter describing how to find and measure these values to determine if a company is worth of your investment dollars.
If you want to learn more about this book and its valuable lessons – We have deep dives into several of the chapters of the book in our series which starts with Chapter 1, here:
Investing Book Series: “Competitive Strategy” Chapter 1 and Using it to Find Your Next Great Investment
#4 Berkshire Hathaway Letters to Shareholders
No surprise here that the most famous investment letters ever written are also one of the most popular reads here on Begin To Invest.
To be fair, you can go online to Berkshire’s website and read these letter there.
But I like this book for a couple reasons.
First, reading on Kindle allows be to highlight and automatically sync my notes into Readwise, an app I use to store notes and review everyday. (Click the link to get a free month to try it out)
Second, this book has letters that are not available online at Berkshire’s website. Berkshire’s investor relations website begins with Buffett’s 1977 letter, but he wrote the company’s letters to shareholders starting in 1965.
The old letters are different and focus more on the business rather than providing readers timeless lessons like his more recent letters do. But, I found them fascinating to see what the early Berkshire company was doing.
This book also used to be printed in paperback form as well , but publication was stopped with the 2014 letter. But, if you like reading physical books better than electronic ones, it is a great option.
We used these letters to create our post where we pull our favorite quote from each letter from 1977 on:
44 Years of Berkshire – Top Quotes from Warren Buffett in His Shareholder Letters
#3 A History of the Global Stock Market: From Ancient Rome to Silicon Valley
Full disclosure – I have not read this book. It appears Amazon’s advertising has led a lot of readers to purchase this book through our ads though.
” In A History of the Global Stock Market, B. Mark Smith weaves an entertaining tale that ranges from medieval trading companies and nineteenth-century robber barons to modern theorists and international speculators. Here, Smith debunks the popular myth that the market is inevitably subject to recurring speculative bubbles and discredits the notion that the current “globalization” of the market is something radically different from what has occurred in the past. “
This is on my reading list for 2021. Check back (Or better yet – Sign up for our newsletter) for a better review in the future.
#2 Intelligent Investor and Security Analysis
Ben Graham’s 2 classics came in as #2 and #3. I combined them here since I find that most people have either read both of these books, or neither of them.
In case you fall in the “neither” category, here’s what you have been missing:
The Intelligent Investor is Ben Graham’s, and the ‘value’ investing world in generals, most popular book. Buffett and countless other investors credit Ben Graham and this book for getting them into investing, and succeeding.
The lessons in the book are timeless, but I love Jason Zweig’s commentary that is in the newest version. It helps bring a modern look at Graham’s lessons.
The Intelligent investor is more friendly for a beginner investor, while Security Analysis gets (much) more advanced.
Security Analysis is more of a textbook than it is a book you would curl up on the couch with on a Friday night.
Of course, that’s good in a way too, because in this book Graham provides you every equation and statistic you need to do a deep dive into a company’s financials. You will notice many of our definition pages cite this book for its examples, formulas, and definitions.
#1 Financial Statements: A Step-By-Step Guide to Creating and Understanding Financial Reports
There is a new edition to this book since I first read it in 2010, but based on the feedback and reviews, it has only gotten better.
When I was first getting introduced to financial statements, everything was a little daunting. Rows and rows of numbers with new terms I was unfamiliar with. Pages of footnotes and appendixes….how does one even start?
This book is beautiful in its simplicity to tackle a company’s financial statements line by line.
The book starts with a 2 page summary for each line you will see across a company’s balance sheet, income statement, and cash flow report. The book explains how everything is connected, and how changes in one report flow through to the others.
The second half of the book walks through detailed examples of a hypothetical company, and how its financial statements would look in a variety of situations or actions.
There are a ton of books on learning to understand financial statements, but in my mind, this book belongs at the top.
Looking Ahead to 2021
What’s on your list to read in 2021? What did our readers miss this year that they should be sure to read this year?
Let us know in the comments below!