Fundamental Analysis: The Best Books on Value Investing

Have you been struggling to put together a plan for investing in stocks? Feeling forced to go back and forth between sources or websites, ultimately realizing you’ve learned basically nothing? This list of books on Fundamental Analysis will hopefully clear up some of the confusion.

When you first get into investing, it’s easy to get overwhelmed with the sea of information out there. It doesn’t help that a lot of this information is also poorly organized or outright wrong.

As an avid reader myself, I know it’s crucial to have the right sources for certain types of information. Thus, I decided to put together a list of some of the best fundamental analysis books out there. If you’re more into technical analysis, there’s a book list coming soon.

This is by no means a comprehensive list of everything you’ll ever need, but it’s a great start. It’s likely that as you build your own personal library, as I’ve done, you’ll find yourself referring back to some of these books repeatedly. Soon, these books will not only serve as invaluable sources of knowledge, but as a place to draw inspiration from when you’re feeling less motivated.

If you know any other fundamental analysis books, don’t hesitate to mention them. I am always looking to learn more about investing, even as a technical trader. If it belongs on this list, I will add it below.

“The Intelligent Investor” by Benjamin Graham (1949)

“Investment is most intelligent when it is most businesslike. It is amazing to see how many capable businessmen try to operate in Wall Street with complete disregard of all the sound principles through which they have gained success in their own undertakings.”

Recognized as one of the greatest investment advisors of the twentieth century, Benjamin Graham’s “The Intelligent Investor” is a must-read. With updated annotations complementing what some call the “stock market bible”, this 600-page tome somehow stays relevant in a time when markets are undergoing some of the most revolutionary changes we’ve ever known.

Graham aims to provide a comprehensive overview of value investing, which refers to buying assets below their intrinsic value. Sounds simple enough, right? Well he goes far beyond the well-known adage of buy low, sell high.

“The Intelligent Investor” presents a strong case against speculation and instead promotes a disciplined approach. You’ll learn about the Mr. Market metaphor, which teaches investors to take advantage of market fluctuations instead of being led by them. It’s easy to forget, especially in the heat of a stressful trade, that the market is constantly undergoing change. Learn to expect these changes, rather than chase them.

In addition, the book’s revised editions include commentary from financial journalist Jason Zweig. Jason writes weekly for the Wall Street Journal, so if you are already familiar with his style, you may appreciate his commentary here.

Limitations of The Intelligent Investor

To be fair, there are some drawbacks to this book. For one, it is not the easiest read on the list. You will have to warm up to it by getting familiar with some more fundamental concepts of the financial markets. If you are new to this industry, this book can get tedious, as it spends a long time arguing against other investment strategies that you may never have even heard of.

Secondly, some of the advice can seem dated. Tips like “only buy dividend stocks” are not helpful for those of us interested in aggressive growth.

“Common Stocks and Uncommon Profits” by Philip Fisher (1958)

Philip Fisher’s “Common Stocks and Uncommon Profits” is a classic text revered for its insightful take on fundamental analysis from a qualitative perspective. One of the most influential investors of all time, Fisher advocates investing in well-managed, high-quality growth companies for the long term, which was a novel concept at the time.

Fisher introduced the concept of “scuttlebutt”. This is the idea of gathering information from various sources to build a complete understanding of a potential investment. This includes speaking to customers, suppliers, competitors, and employees to gather valuable insights not readily available in financial statements.

Fisher also includes a list called the “Fifteen Points to Look for in a Common Stock.” Focusing on long-term growth, it’s undeniable that Fisher influenced generations of investors. Warren Buffett has admitted to being “85% Graham and 15% Fisher.”

Limitations of Fisher’s Methods of Fundamental Analysis

It’s difficult to implement Fisher’s time-consuming approach. It emphasizes qualitative factors like company outlook and management, but leaves out financial analysis. If you’re a fan of metrics and quantitative analysis, this book falls a bit short.

Written in 1958, it’s also outdated for the 2020s. For example, Fisher mentions company visits and having discussions with management, which is something not as easily accessible these days.

“Security Analysis” by Benjamin Graham and David Dodd (1934)

“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”

“Security Analysis,” another foundational work by Graham and co-authored by David Dodd, takes a deep dive into the techniques of analyzing securities such as stocks and bonds. This 700-page behemoth was perhaps just as groundbreaking as “The Intelligent Investor.”

Graham provides an in-depth explanation of fundamental analysis, and gets very technical at times. Just like with The Intelligent Investor, this is not a light read. The intended audience is financial professionals, and serious individuals when it comes to investing. If you are looking for something more beginner-friendly, try this one at a later time.

In Security Analysis, you’ll get acquainted with topics like balance sheet analysis, income statement analysis, valuation, and bond analysis.

Outdated fundamental analysis? You decide.

This book is nearly 90 years old at the time of writing this article. It’s undeniable that new regulations and the rise of electronic trading have changed the landscape for investing. With that said, it’s still quite a dense compilation of investment wisdom. There are plenty gems for those willing to dig through it.

“A Random Walk Down Wall Street” by Burton Malkiel (1973)

Burton Malkiel’s “A Random Walk Down Wall Street” deserves a mention as one of the main contrarians on this list. Malkiel, a Princeton economist, focuses primarily on the efficient market hypothesis (EMH), suggesting that the future price of securities is largely unpredictable. This is arguably the most distinctive aspect of the book.

The primary appeal of Malkiel’s book lies in its comprehensive and accessible exploration of various forms of investment, ranging from stocks and bonds to real estate and collectibles. He provides a clear overview of a number of investment strategies and tools, including fundamental analysis, technical analysis, and various types of funds. The book’s breadth makes it a valuable resource for both novice and experienced investors.

According to the EMH, the prices of traded assets already reflect all publicly available information. Therefore, it is impossible to consistently achieve returns in excess of average market returns on a risk-adjusted basis. Malkiel famously argues that a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would perform just as well as one carefully selected by experts.

Does Malkiel’s Walk Take the Wrong Turn?

I disagree with the blindfolded monkey portfolio (depending on the monkey’s competition). Malkiel’s book dismisses the possibility of achieving above-average returns through skillful active investing.

If you’ve read up on some of the more successful investors and technical traders, you might agree. There are plenty of examples of those who have consistently outperformed the market. You can learn about some of these traders in the famous book “Market Wizards, by Jack D. Schwager“. Skill and analysis do play a role in successful investing. This idea that you cannot outperform the market is simply a cop out in my opinion.

Some also say that Malkiel oversimplifies some concepts, potentially leading readers to misunderstand certain aspects of investing.

“Fundamental Analysis and Position Trading: Evolution of a Trader” by Thomas Bulkowski (2012)

Thomas Bulkowski is perhaps most known for his deep dive into candlestick patterns, which serve as a cornerstone in most technical analysis strategies. I was a fan the moment I first went through his candlestick analysis. He provides even more value to the investing community with the “Fundamental Analysis and Position Trading“.

Here, Bulkowski provides a solid overview of important fundamental indicators, such as revenue, earnings, cash flow, and more. He demonstrates how to interpret these indicators, how they tend to impact a company’s stock price, and how to use this information to make informed trading decisions.

Bulkowski uses statistical analysis to debunk some common trading myths and misconceptions. You’ll enjoy the real-world case studies and statistics that help clarify some of the nuances of position trading. While some still have irrational faith in blindfolded monkeys, Bulkowski continues to prove that investing is not flipping a coin.

Does Bulkowski have too much confidence in his approach?

Bulkowski is not really meant for beginners. There is a significant depth of content, and you can find another example of his attention to detail in his book “Encyclopedia of Candlestick Patterns“. If you’re new to investing, you will likely feel overwhelmed at the amount of information and jargon that Bulkowski is known for.

Another criticism some have is that his tone is perhaps too confident. While I believe that anyone with his level of understanding is right to feel confident as an authority in the industry, there are definitely those that don’t want to be preached to. If that’s you, you may find his work both dense and difficult to accept as truth. On the other hand, you’re probably missing out on one of the best resources out there.

“Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports” by Howard Schilit and Jeremy Perler (1993)

If you’re interested in learning about how some try (successfully and unsuccessfully) to get returns illegally, this book is a good place to start. Dive into the murky waters of financial fraud and learn all about Financial Shenanigans with Howard Schlit and Jeremy Perler. There are all kinds of potential deceptive practices that companies might use to make their financial performance appear better than it truly is.

The book shines a light on various accounting gimmicks and underhanded tricks that companies use and have used to manipulate their financial statements. Investors who like to investigate each company closely will want to understand the darker side of corporate accounting.

The authors also update the book periodically to incorporate recent scandals and fraudulent practices, making it a dynamic resource for investors who are keen to stay ahead of unscrupulous corporate maneuvers. These updates are useful as they showcase the evolving nature of financial fraud and the constant inventiveness of those who wish to deceive.

How murky are those waters?

Perhaps a little too murky, for beginners at least. The depth and complexity here might be a bit overwhelming, similar to some of the earlier books on this list. This book requires that you have a fundamental understanding of financial reporting to fully grasp the content. Therefore, it may be too dense and sleep-inducing if you aren’t a fan of financial reports.

Also, this book focuses primarily on US-based corporations and uses US accounting standards as a reference point. It might require some adaptation if you’re more accustomed to accounting practices and regulations in other countries.

Finally, and this is a debatable criticism, to be fair, it’s possible that this book will turn you into a cynic. The intense focus on financial malfeasance might make you lose hope in the fairness of the open markets, even though it is definitely not the intention. It’s important to remember that while some corporations engage in deceitful practices, many operate honestly and transparently. Don’t give up just yet!

“The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market” by Tobias E. Carlisle (2018)

“The Acquirer’s Multiple” is a compelling read for those interested in value investing, particularly in the realm of deep value investing. Deep value investing is the practice of buying stocks significantly below their intrinsic value.

Carlisle provides an alternative perspective to the widely accepted teachings of Benjamin Graham and Warren Buffett. You’ll learn about a pretty straightforward formula, known as the Acquirer’s Multiple, to find significantly undervalued companies.

Tobias Carlisle integrates his legal background and investing expertise to present a well-structured, practical guide. Applying the Acquirer’s Multiple to your own investment strategy is the best way to learn about how it all works.

Is Carlisle’s Philosophy too simplified?

There’s no doubt that simple strategies can be consistent, but finding these strategies is not always so simple. One limitation of “The Acquirer’s Multiple,” however, is that it relies heavily on a single metric for valuation.

While this makes the investment process feel easier, it may omit important aspects of a company’s financial health that are not captured by the Acquirer’s Multiple. This book is a great starting point, but probably not all you’ll need to know to find those consistent returns.

“Quality of Earnings” by Thornton O’glove (1987)

If you’re a fan of investigating companies before investing in them, this book should alrady be on your bookshelf. Thornton O’glove’s “Quality of Earnings” is an underrated gem in the world of fundamental analysis. The book provides an array of techniques to detect warning signs in a company’s financial statements and identify companies with high-quality earnings.

O’glove, a Wall Street analyst, presents a method of analysis that emphasizes the importance of cash flow and the quality of earnings. He warns about the manipulations in income statements and balance sheets that can create an illusion of high earnings quality.

The book dives into complex topics like buybacks, accounting changes, and asset revaluations, yet it manages to remain accessible and engaging. It is particularly known for its thorough checklist, which aids investors in analyzing the quality of a company’s earnings.

Perhaps a little too focused on the US?

Similar to the situation with Financial Shenanigans, Thornton focuses primarily on the US markets, leaving a bit to be desired for readers interested in the global economy or emerging markets. Plus, since this book was written in 1987, it’s not going to cover anything useful regarding the more electronic markets of today.

“The Little Book of Valuation: How to Value a Company, Pick a Stock and Profit” by Aswath Damodaran (2011)

Aswath Damodaran’s Little Book of Valuation provides a compact guide that offers investors insightful methods to valuing stocks. Damodaran is a highly respected professor at the Stern School of Business at NYU, and this easy-to-digest guidebook is a great way to get into his material.

Both the novice investor, making their first foray into stock valuation, and the seasoned professional, polishing their fundamental analysis skills, can gain something from Damodaran.

Damodaran’s approach is grounded in the understanding that every company’s value derives from its existing business operations and its potential for future growth. One of the book’s key strengths is its simplicity. Damodaran does a commendable job breaking down complex valuation methods into understandable segments. He walks readers through the valuation process step-by-step, providing valuable insights on how to assess a company’s competitive advantages, growth prospects, and risk factors.

A Leap of Faith Might Help Here.

While the book is overall an easier read, there are some concepts you should be familiar with in advance. Some parts will expect you to understand things like the discounted cash flow model or the capital asset pricing model. Ever heard of those? I hadn’t.

Moreover, the book heavily relies on the assumption that markets are generally efficient and that stocks tend to gravitate towards their intrinsic value over time. This premise, while largely accepted in academic finance, is disputed by some practitioners who believe markets can remain irrational for extended periods.

“Value Investing: From Graham to Buffett and Beyond” by Bruce Greenwald, Judd Kahn, Paul Sonkin, and Michael van Biema (2001)

The final book on this list is “Value Investing: From Graham to Buffett and Beyond” by Bruce Greenwald, Judd Kahn, Paul Sonkin, and Michael van Biema. Greenwald and his co-authors provide a comprehensive overview of the value investing process, beginning with its foundations as laid out by Benjamin Graham and culminating in its modern incarnations.

One of the unique aspects of this book is its detailed case studies of successful value investors, including the legendary Warren Buffett. The authors do a decent job of providing readers with a rare glimpse into how various investing geniuses think about and execute their investment strategies. Each investor profiled in the book has a unique approach, but they all share a common belief in the importance of value, a focus on intrinsic value rather than market perceptions, and a commitment to disciplined analysis.

The authors also outline a systematic approach to value investing, including guidance on how to search for investments, conduct a fundamental analysis, and make buying and selling decisions. This practical focus makes the book a valuable resource for investors seeking to apply the principles of value investing in their own portfolios.

Too much Graham and Buffett?

One notable limitation is the relative lack of attention to certain contemporary issues and challenges. For instance, the book doesn’t extensively address how to value companies in high-tech industries, where traditional metrics such as earnings or book value may not be applicable. Additionally, the book was written in 2001, and while its foundational principles remain sound, some aspects may feel somewhat dated in today’s rapidly evolving financial landscape.

Another potential challenge for readers is the book’s assumption of a relatively high level of financial literacy. Some sections delve into fairly complex financial concepts and models, which could be a barrier for less experienced investors.

Eager to get started with investing and Fundamental Analysis? Start simple. Then expand.

Each of these books is certainly worth going through at least once, though it’s quite a lot of text. There’s some technical and dense reads on this list, but don’t get overwhelmed by the financial jargon.

Much of it is not necessary in most situations for most investors. You likely won’t need to memorize an accounting dictionary at any point during your investing career. It might help, but I don’t recommend it.

What is more important is understanding the mindset and approach that some of these successful investors took, or still take, when making decisions in the market today. You can’t expect similar results by copying them, but you can certainly achieve your own success in other ways. Following in the footsteps of any of these major investing legends is a good idea. But make sure to take their philosophies and tailor them to fit your own investing style.

While some concepts may seem dated, the markets themselves do not change as much as people think they do. The mediums through which we place trades and build portfolios have certainly changed, but human psychology is still the main force driving prices up and down.

I’ve also covered some of the best technical analysis and trading psychology books. Feel free to check those out next:

Technical Analysis Books

Trading Psychology Books