Favorite Investment Books and Resulting Strategies
My favorite investment books led me to two categorizations (i.e. strategies) of companies. Good and Not Good.
Good companies may have durable competitive advantages and holding an investment for years may benefit from compounding. (https://www.veriteventures.com/post/how-i-value-good-companies)
Not Good companies seem unlikely to have durable competitive advantages and thus I only see them as mean reversion candidates for investment. In those cases, time is your enemy (i.e. meaningful compounding is less likely) so buying at a certain discount to intrinsic value, then selling at higher prices, repeating the process, and being indifferent to holding period is the route I take. (https://www.veriteventures.com/post/how-i-value-most-assets-companies)
The Little Book that Beats the Market by Greenblatt was most influential in developing my Good company strategy. It attempts to pinpoint the cross-section of the relatively cheapest AND highest quality companies. If you follow the strategy exactly, it is mechanical and unemotional and requires zero research because a companion website provides the list of stocks to buy. I use a modified version that better fits my goals. The Little Book that Builds Wealth by Dorsey similarly attempts to help identify companies with competitive advantages.
My Not Good strategy was influenced The Net Current Asset Value Approach to Stock Investing by Wendl and Quantitative Value by Gray and Carlisle. These books led me to conclude that mean reversion is the most important aspect of value investing and therefore I don’t just look for the best companies. My primary goal is finding the relatively cheapest, even if they are Not Good.