Books about investing strategy written by successful investors can really help when it comes to developing our own investing style.
I’ve got loads of them and I turn to them frequently. Many are written by US investors but there are also several outstanding publications penned by well-known outperforming British investors. Here are my four favourites and why I like them.
How To Make A Million – Slowly
This book by Lord John Lee emphasises keeping the process of investment simple. He tends to buy shares in smaller firms and sticks with them as they grow, often delivering multi-bagging returns over time.
To begin with, Lord Lee looks for no more than a firm delivering sustainable and rising dividend payments. He believes that if he’s right with his analysis, a steady and rising dividend income will lead to capital appreciation taking care of itself as the share price rises and the underlying business grows.
Lord Lee considers just a few indicators to start with, such as a firm’s P/E rating, dividend yield, the level of debt and net asset value. There’s a clear emphasis on protecting the downside in the manner many value-oriented investors will recognise. However, unlike some approaches to value investing, Lord Lee aims to stick with a company for years until it accelerates its profit growth leading to a valuation uprating.
Investing Against The Tide
Anthony Bolton had great success as a fund manager running the Fidelity Special Situations fund, which he managed from December 1979 to December 2007. Over that 28-year period, he achieved an annualised return of around 19.5% a year and this book followed a couple of years later in which he tells us about his methods.
He emphasises the quality of a business franchise, the strength of management, plus valuation, and believes that every stock you own should have an investment thesis. He says the heart of his approach has been buying recovery or turnaround stocks with attractive valuations, but he pays attention to investor sentiment too and always started his analysis by looking at the share price chart.
Beyond The Zulu Principle
Jim Slater’s classic, The Zulu Principle, was updated with this book and the essence of his investment style was to seek extraordinary profits from growth shares. He’s famous for combining the price-to-earnings rating of a company with its expected rate of earnings-per-share growth to form what he called the price-earnings-growth factor (PEG).
However, the book is also packed with other useful advice and examples of what indicators help to identify stocks that look set to go on to outperform. Jim Slater’s son Mark currently runs an outperforming fund based on the investing principles in the book.
Free Capital
Investor Guy Thomas wrote this book about 12 other highly successful and mostly British investors who describe how they made their fortunes in the markets.
I reckon the book is a must-read for investors operating now because it delivers pragmatic tips, strategies and insights, from 12 different perspectives. There’s something to accommodate most investing styles in the book, which also reveals where the 12 investors agree and differ on strategy.
