Professor Buffett's Library
by Don Dion
Monday, September 28, 2009
provided by TheStreet.com


Amazon.com recently listed more than 200,000 titles under the keyword "investing." Some of those books are useful. Others are a waste of time. And many, designed to exploit our ignorance and greed, are downright dangerous.

How do you approach this slew of investment information without getting overwhelmed? Every month, financial writers and journalists churn out hundreds of articles that aim to explain the financial world to ordinary investors. The financial media is full of investment picks, ideas, strategies and other advice.

Books still play an important role, however, in mastering the art of intelligent investing. Selecting the right tome can be a daunting proposition. The first place to start is with the basics. The best investment books avoid the sleazy manipulation of the get-rich-quick schemes you'll find in many books, magazines and, newsletters. Instead, they seek to impart the hard-won wisdom of the great investors to readers like us.

Which books should you read?

Books can serve to strengthen your fundamental investing knowledge while providing you with an important historical prospective.

In addition to several guides and anthologies that offer timeless advice, a number of books about Warren Buffett's philosophy provide a valuable foundation for any long-term investor.

While Warren Buffett has never penned his own book of investing advice, several stand-out books have been written about his investing style.

Even if you stick to mutual funds, rather than picking individual stocks, Warren Buffett's method of stock selection can help you evaluate the skills and strategy of a mutual fund manager.

Here are some picks. The best investors, like Warren Buffett, use a strong understanding of the fundamentals to inform their personal investment philosophies. One good place to begin developing your own foundation is an anthology.

Charles Ellis, a money manager himself, compiled Classics: An Investor's Anthology for an audience of students and professional money managers. It includes many short pieces by respected investment thinkers -- the kind of material that has appeared in professional journals over the years.

When it comes to economic trends, history often repeats itself. Familiarizing yourself with the history of investment ideas is one of the most effective ways to prepare for the future.

The Only Investment Guide You'll Ever Need isn't quite what its title claims, but it's one of the books every investor should read. The book was written by Andrew Tobias and first published back in 1978, when very few readers sought out books about personal finance. It became a national best seller for two reasons: the book is funny and creative.

The revised version is worth reading whether you are a novice or an expert. Tobias' ideas about taxes, commodities, stocks, insurance and other financial matters will help you rethink some of the conventional wisdom that gets many investors in trouble.

Want a good story? Have a look at Buffett: The Making of an American Capitalist. This lively, well-researched biography is a great book about his life and his investment methods.

It's also great background for readers who want to dip into The Essays of Warren Buffett: Lessons for Corporate America that is edited by Lawrence A. Cunningham. Buffett has never written a book, but his annual letters to shareholders are famous for their wit and intelligence. Cunningham has compiled some of the best material in this slim book. This book serves as a window onto his methods and his beliefs.

Here's a brief sample: "I've said many times that when a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact. I just wish I hadn't been so energetic in creating examples. My behavior has matched that admitted by Mae West: 'I was Snow White, but I drifted.'"

The Snowball: Warren Buffett and the Business of Life is unique among other Buffett pieces. The author, Alice Schroeder, sits down with the legendary investor to discuss everything from Berkshire Hathaway (BRK.A) to his family life. This book is the closest thing to a Buffett autobiography on shelves today.

To truly understand Buffett, the best place to start is with his inspiration. Buffett got his start as a student of Benjamin Graham, the father of securities analysis. Graham's 1934 classic, The Intelligent Investor, is a wonderful introduction to the master's methods. The book has sold more than a million copies in hardcover; more importantly, it offers insight into how Graham thought about investing -- in particular his notion of a margin of safety. Graham advocated buying cheap stocks of companies with sound financials, establishing a "margin of safety" by purchasing the stock below its intrinsic value.

The Intelligent Investor suggests that stocks can be prudent investments, given the right approach. That idea shocked people who had endured the stock market crash of 1929 and the ensuing Depression. Jason Zweig, a senior writer for Money magazine, has done an excellent job in the latest issue of the magazine of updating the book without undermining its essential wisdom.

It was Graham's lessons that helped Buffett find winning companies such as Coca-Cola (KO[/url), Burlington Northern Santa Fe ([url=http://finance.yahoo.com/q?s=BNI]BNI), Goldman Sachs (GS) and Nalco (NLC).

For a little hint to readers who may find the 368-page book daunting, Buffett has gone on the record saying that the most crucial chapters in "The Intelligent Investor" are 8 and 20.

Navigating through the sea of investment advice books can be a daunting task. The Buffett basics are a good place to start, and the wisest investors will stay on top of new investing trends while keeping in mind the fundamentals.

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