Rule #1 - Phil Town (5 of 5 Discounted Stocks)

Of all the many books I've read over the past year on investing, this is the most comprehensive resource I've found. Phil Town provides a solid foundation for anyone wanting to get into value investing. The value investing strategy is essentially buying stocks when they're cheap and then selling after the market corrects. Town pulls many of his core philosophies from famous investors Billy Graham and Warren Buffet, but updates the ideas for today's market conditions. This book is a great reference for anyone just getting started.

Once you've identified a business sector you're interested in and familiar with, Town helps you to identify particular companies that might make good investments. He guides you through the process of determining whether or not a business is going to continue to grow in the future. Next, he provides methods for determining the true value of the business. If the price per share offered by the market is less than half its value he recommends buying the stock and waiting for the correction. Once it has stopped rising, you sell off and take the profits.

Town's method is simple, concise and enlightening. It is targeted to beginning investors with a relatively large amount of capital who are looking for limited risk and average grow potential. If this is you, I would highly recommend investing some money in this book. You won't regret it.

A Mathematician Plays the Stock Market - John Paulos (3.5 of 5 Shares of WorldCom)

Sorry to leave these blank posts floating out here for so long. Embarrassing, no? I suppose it's kind of like walking around in public with your zipper down. I've spent the last week trying to adjust to Utah life, return to work and start school. Tonight is my first break. Oh well. So it goes.

When I saw this book at the library a few months ago, I was anticipating a John Nash Beautiful Mind experience...well...not quite. Not that exciting. Instead, you get to hear Mr. Paulos whine several times about his dumb decision to buy WorldCom at it's peak and then the dumber decision to hold it until he had lost almost all of his money. Hm...poor guy...probably made it all back from publishing this book.

It's not all bad. You will get some interesting discussions of the probabilities surrounding the buying and selling of stocks. Some knowledge of calculus might be needed to follow all of the mathematical computations, but he explains everything in basic terms at the end. He also spends a lot of time covering the psychological aspects of investing.

If you don't go in expecting too high of a return, you'll probably enjoy this book. Cheers.

Buffettology - Mary Buffett (4.5 of 5 Shares of Gillette)

Mary Buffett was married to one of Warren's sons for a time before filing for divorce. During her stay in the Warren compound she had the opportunity to see the inner workings of the Oracle of Omaha's investing strategy. In this book she outlines the core Buffet investing strategies.

The underlying theme of Buffet's time-tested strategy is value investing in bear markets. When the indexes hit bottom, you dump your money into companies that have been around for many years and aren't going anywhere. They make products that consumers will always buy and have to buy often. The best way to find these companies is by walking into any local grocery store. There you'll find names like Johnson and Johnson, Mars, Gillette, etc. Their stock prices will be down because of the overall market but they will surely rise during the economic recovery.

There is also an interesting section of the book that discusses arbitrage. This is essentially looking for rumors of potential buyout situations. When a company agrees to buy another, it will establish a buyout price per share for all available shares. Your profit will be the difference between the current share price and the buyout price. This strategy is difficult and more risky than the first. It is hard to find these buyout deals before the crowd does, and the agreements often don't go through in the end. The buyout offers do however create a great deal of volatility that day traders can exploit.

The Book of Investing Wisdom - Peter Krass (4 of 5 Horror Films)

Wisdom is a compilation of short essays by accomplished stock investors.  Each provides interesting ideas about how he or she became successful.  Biographical notes about each character were enlightening.  Two essays were particularly interesting.

The first was about shorting stocks.  Most people think that you can only make money when the market goes up.  This isn't true.  Shorting stocks is the process of making an agreement to buy a stock at a future time when the price is lower.  This difference between the price now and when you'll buy it later is your profit margin.  As this essay points out, in an unstable economic environment it is often much easier to predict a fall in prices than a rise.  The essay outlines the actions of a few of the investing greats during the Great Depression who walked away with millions of dollars on Black Thursday.

The second is about how one can predict the movement of stocks based on cultural shifts.  The author cites such things as the number of horror films in the theater to the length of skirts and hair styles.  The number of horror films reflects the general level of pessimism in the market.  Short skirts and absurd hair styles correlate with more speculative investing activity. 

Stock Investing for Dummies - Paul Mladjenovic (4 of 5 Shorted Stocks)

I've read a few books from the Dummy series in the last few years.  This one seems to be pretty standard: a lot of basic information, but not much depth.  It gives you a lot of information about what stocks are and provides some basic investment strategies.  That's about all I can remember.  I listened to it while moving 20-pound bags of hot chocolate at Welfare Square.  Oh well.