10 Must-Read Books for MBA Finance Students

My name is Paul Abrogouah. I am second year MBA student with an emphasis on finance. Given my passion for equity valuation, coupled with two years of work experience as an equity analyst, I was very excited about this opportunity to share a list of 10 must-read books about finance.

You will find below a list of 10 investment books that considerably impacted my knowledge about how to value a company. I consider the first four books in the list as the mind modelers, because of the frameworks that they provide. The next three will give you the required tools that you need to actually do the job. The last three books may not seem finance related, but they help you in making sense of financial numbers.

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

And 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 has been a mind modeling book for me as it influences the way I look at common stock investing. The book’s author, Benjamin Graham, is well-known as the “Father of Value Investing”. The first nine chapters cover investing basics that all investors could benefit from. Chapters 10 to 20 focus strictly on fundamental analysis, stock selection, convertible issues and warrants.

 

  • Common 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 well known as a growth investor. In his book, he lists fifteen points that describe his investment philosophy, known as “scuttlebutt”.

 

  • Security 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

As far as I am concerned, this book should be read right after The Intelligent Investor as it builds upon the knowledge that you gained in that book. However, as most readers will tell you, it is not an easy to digest book given how lengthy and technical it is. To better understand a chapter, you usually need to capitalize on what you learned in previous chapters.

 

  • The 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, I mention this book because of its 10-Minute test and its insight on several industries:

  • In chapter 12, the author discusses a 10-Minute Test to determine if it’s worth examining a specific stock in detail. This has been pretty handy to me, especially when I’ve had a list of 10 attractive stocks, yet I only had two weeks to prepare a pitch recommending one of them.
  • From chapter 14 to 26, the author gives 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 impacted the performance of the industry in the past.

 

  • Best 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

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

 

  • Investment 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 must-haves when it comes to applying investment valuation techniques such as discounted cash flow models and relative valuation models. While covering the same topic, I still believe that both have to be read and kept, because one talks about some critical points that are not covered by the other. For instance, Investment Valuation has a chapter on “Valuing Equity in Distressed Companies”, while Valuation discusses “Valuing flexibility”.

 

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

Given the recent accounting 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 talks in detail about each component of  financial statements.

 

  • The 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 widely followed on Wall Street. The book mentions how to view economic indicators, their influence on the market, and what they say about the future.

 

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

Porter’s analysis of industries captures the complexity of industry competition in five underlying forces: power of buyers, power of suppliers, rivalry, threat of new entrants, and threat of substitutions. In addition, Porter introduces one of the most powerful competitive tools yet developed: his three generic strategies — lowest cost, differentiation, and focus — which bring structure to the task of strategic positioning.[1] A must-have book for finance professionals, this book helps an equity analyst understand how a company creates its competitive advantage or destroys it.

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Paul Abrogouah is a 2nd year MBA student concentrating in Finance. He has professional experience in equity analysis and is seeking to earn the designation, Chartered Financial Analyst.

 

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