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10 Must-Read Books for MBA Finance Students

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Paul Abrogouah graduated in 2013 from the Crosby MBA program with a concentration in finance. He works as a fixed income analyst at Shelter Insurance Company and has passed Level I of the CFA exam. After three years of work experience as an equity analyst, he now is building the perspective of a bondholder, specifically covering the markets for corporate and municipal bonds.

These 10 books considerably impacted my knowledge about valuing companies.  I consider the first four books “mind modelers” because of the frameworks they provide.  The next three are required tools, those actually needed to do the job of a financial analyst.  The last three books on the list might not seem directly related, but they help you make sense of financial numbers.

intelligent_investorThe Intelligent Investor (2009) by Benjamin Graham, Jason Zweig and Warren E. Buffet

… everyone who buys a so-called hot common-stock issue, or makes a purchase in any way similar thereto, is either speculating or gambling

Benjamin Graham

Frequently listed among the top three must-read finance books, The Intelligent Investor influenced the way I look at common stock investing.  The book’s author, known as the “Father of Value Investing,” begins with advice from which all investors could benefit.  Chapters 10 to 20 focus strictly on fundamental analysis, stock selection, convertible issues, and warrants.

common_stocks_uncommon_profitsCommon Stocks and Uncommon Profits and Other Writings (2003) by Philip A. Fisher and Kenneth L. Fisher

I sought out Phil Fisher after reading his Common Stocks and Uncommon Profits … A thorough understanding of the business, obtained by using Phil’s techniques … enables one to make intelligent investment commitments.

Warren E. Buffet

Unlike Benjamin Graham, Philip Fisher is a growth investor. In his book, he lists fifteen points that describe his investment philosophy, known as “scuttlebutt.”

security_analysisSecurity Analysis: 6th Edition (2008) by Benjamin Graham & David Dodd

There are four books in my overflowing library that I particularly treasure …; a third is an original copy of the book you hold in your hands.

Warren E. Buffet

Although this book should be read right after The Intelligent Investor because it builds upon the knowledge of that book, it is not easy to digest.  The book is rather lengthy and technical.  But, as each chapter builds upon that which precedes it, those who make it to the end learn a lot.

five_rules_successful_stock_investingThe Five Rules for Successful Stock Investing (2004) by Pat Dorsey and Joe Mansueto

From the title, one would think that the book talks about the same points mentioned in the previous books.  However, a couple of elements make this book unique:

  • Chapter 12 provides a 10-minute test to determine if it’s worth examining a specific stock in detail.  This has come in handy, especially when I’ve had a list of 10 attractive stocks but just two weeks to prepare a pitch for one of them.
  • Chapters 14 to 26, provides a sector analysis of several industries, including healthcare, banks, asset management, and insurance.  He covers not only how the industry functions, but also the critical factors that impact its past performance.
best_practices_equity_research_analystsBest Practices for Equity Research Analysts (2010) by James J. Valentine

The key to generating alpha is having a more accurate view about a future stock price than the market. This can only be done on a consistent basis if the analyst has an edge over the market in one of the three areas that compose our FaVeS framework: Financial Forecast, Valuation and Sentiment.

James J. Valentine

This book is a must for any student interested in a career as either a sell-side or buy-side analyst.  With 16 years of work experience on Wall Street, James takes you through producing a research report on a publicly traded company.  He explains how and where to get information and how to effectively communicate those findings in a report.

valuationinvestment_valuationInvestment Valuation: Tools and Techniques for Determining the Value of Any Asset (2012) by Aswath Damodaran and Valuation: Measuring and Managing the Value of Companies (2010) by Tim Koller, Marc Goedhart, David Wessels and McKinsey & Company Inc.

Both books are musts when it comes to applying investment valuation techniques, detailing discounted cash flow models and relative valuation models.  They cover the same topics but serve as companions to each other because one discusses some critical points not covered by the other.  For instance, Investment Valuation has a chapter on equity of distressed companies, while Valuation discusses “valuing flexibility.”

GAAPInterpretation and Application of Generally Accepted Accounting Principles (2011) by Steven M. Bragg

Given recent scandals, it is beneficial for financial analysts to enhance their accounting acumen.  When trying to identify “yellow flags” through forensic accounting, as recommended by James J. Valentine, I keep this 1,344 page book around at all times because it details each component of financial statements.

secrets_eceonomic_indicatorsThe Secret of Economic Indicators (2012) by Bernard Baumohl

Great analysts are those who work on a more macro level.  Most equity analysts are expected to look at stocks from a bottom-up approach.  Those who can also look at them from a top-down approach have a competitive advantage.”

Drew Jones, former Associate Director of
Research at Morgan Stanley

This book talks about a broad array of economic indicators followed by Wall Street. The book examines economic indicators, how to view their influence on the market and what they say about the future.

competitive_strategyCompetitive Strategy: Techniques for Analyzing Industries and Competitors (1998) by Michael E. Porter

Porter’s analysis of industries captures the complexity of competition through five underlying forces: power of buyers, power of suppliers, rivalry, threat of new entrants, and threat of substitutions.  Additionally, Porter introduces one of the most powerful competitive tools yet developed: His three generic strategies  lowest cost, differentiation, and focus  that structure the task of strategic positioning.  A must for finance professionals, this book helps an equity analyst understand how a company creates, and undermines, its competitive advantage.


5 Comments

  1. CrisisMaven says:

    “… having a more accurate view about a future stock price than the market …” Indeed, this flies into the face of random walk and efficient market hypotheses. Like the joke where an efficient market theorist walks down a road an another remarks: “Look, there on the ground – a ten dollar bill”; to which he retorts “Don’t bother – if that were a bill, someone would have picked it up already”. The true “secret” is that no market has an unlimited (“infinite” like in multiple universe theory) number of participants. There are bound to be facts that either have not been discovered or if not yet set in relation to every other fact available. And even if, then it still takes a “reasoning” being to understand which is pertinent and which is not. Hence the “geniuses” like Buffett abide by Edison’s remark “1% inspiration and 99% perspiration”.

  2. Ludmila says:

    I’m reading The Five Rules for Successful Stock Investing right now and I can tell that there are a lot of new information for me. Thank you for this list.

  3. check says:

    Thank for these great tips these would help me :)

  4. krishna bahadur thapa says:

    good

  5. Laís says:

    I had read the most books on finance and hit you in the selection for college , congratulations! What I liked most was ” uncommon common shares and profits , and Other Writings by Philip A. Fisher and Kenneth L. Fisher “

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