Naworski Investments

I am fascinated by investing, its history and the legendary investors who have beat the odds. Learning the lessons of the market, not playing hunches or taking gambles, is the only way to succeed. I have studied investing carefully--and I continue to learn as much as I can, putting that knowledge to work for you.

The list below shows my favorite books about investing. I don't expect my clients to read them--though you can certainly profit from them. I offer the list to give you a sense of my own thinking and what it's based on.

Books are ranked by importance; those with commentaries are more important to me than those without. The commentaries should highlight my investing philosophy and the influences that these books have had on it.

1. The Intelligent Investor, Benjamin Graham (5th ed. 1973)

--Warren Buffett calls this the best book on investing ever written and I agree. This book provides the framework for my investment theory. At first reading, I lacked the knowledge and experience to fully appreciate Graham's wisdom. But after honing my own theories and reading many other investment books, I now recognize the value of this work. Successful investing is very difficult. As the closing sentence in this book says: "Achieving average results is easier than it looks [indexing] and achieving superior results is harder than it looks."

2. One Up on Wall Street, Peter Lynch (1989)

--Another book that gets better with time-- or as I have improved my own stock selection techniques. Lynch assumes that the average layperson can utilize his methods, but every time I read it I discover another concept that I can use. This book was written by someone who was down in the trenches every day. Though often labeled a growth investor, I see streaks of Warren Buffett and Benjamin Graham in this work. As Buffett says, growth and value are different sides of the same coin.

3. Security Analysis, Benjamin Graham (1st ed. 1934)

--The book that created security analysis as we now know it. Graham brought a scientific and mathematical approach to investing. I was curious about Graham's views on the financial bubble of the late 1920s and the stock market crash. What was surprising was how similar the late 1920s were to the late 1990s. Take this passage from page 14: "But the "new era" commencing in 1927 involved at bottom the abandonment of the analytical approach; and while emphasis was still seemingly placed on facts and figures, these were manipulated (my emphasis) by a sort of pseudo-analysis to support the delusions of the period. The market collapse in October 1929 was no surprise to such analysts as had kept their heads...." And on page 11: "The "new era" doctrine--that "good" stocks (or "blue chips") were sound investments regardless of how high the price paid for them--was at bottom only a means of rationalizing under the title of "investment" the well-nigh universal capitulation to the gambling fever."

4. Reminiscences of a Stock Operator, Edwin Leferve (1923)

--This book was written under a pen name by Jesse Livermore, a famous trader of the early 1900s. Why do I read a book that is seventy years old? The ideas are timeless and the basic concepts of investing are universal. No one has repealed the laws of human nature and the business cycle. Investing is part art and part science. This book does a great job detailing how human nature affects stock action. You can see Livermore's transformation from a pure trader in the old bucket shops of the early 1900s to an investor who realized that he had to buy before the market--not follow it. That took superior and painstaking analysis of the fundamentals. People often attributed his prescient stock picks to luck or a gambler's feel. He would tell you that you make your luck by doing the hard work.

5. Technical Analysis of Stock Trends, Robert D. Edwards and John Magee Commentary (1992)

--The bible on technical analysis. Very thorough. I use technical analysis to determine when a stock is washed out and hopefully cannot drop significantly lower. I focus on trends, moving averages and support levels. I do not use it for momentum investing. A true investor would not argue that a stock is a better buy at $30 than at $20. Obviously the investor's rate of return will be much lower if the stock reaches any higher price. But a momentum player and chartist would say that it is better to buy at $30 since the stock has demonstrated that it is strong. The only way to profit from buying high and following the market is to get lucky more often than not. Since others are attempting to do the same thing, the efforts of everyone are self-defeating and the trader will lose in the long run.

6. John Neff on Investing, John Neff (1998) Commentary

--Neff ran the Vanguard Windsor fund in the 1970s, 1980s and early 1990s. Only Peter Lynch eclipsed his record. Neff focused on buying good but often boring businesses at low PEs. He believed in locking in gains after 30% or so rises. His type of investing is grind it out--three yards and a cloud of dust.

7. Beating the Street, Peter Lynch (1993) Commentary

--As often is the case with record albums, this follow-up was not as good as Beating the Street but it has certain insights which are critical. Lynch, though labeled a growth investor, fondly references Warren Buffett and outlines strategies not considered to be growth stock buying. The line between growth and value investing--labels you will often hear--is blurry and it makes little difference. Who does not want to buy a business that is growing well at a bargain price?

8. The Mind of Wall Street by Leon Levy (2002)

9. The Warren Buffett Way, Robert G. Hagstrom, Jr. (1995)

10. Conservative Investors Sleep Well, Philip Fisher (1972)

11. Bear Market Strategies, Harry D. Schulz (1983)

12. Technical Analysis, Martin J. Pring (1991)

13. Benjamin Graham on Value Investing, Janet Lowe (1994)

14. The Midas Touch, John Train (1987)

15. Common Stocks and Uncommon Profits, Philip Fisher (1958)

16. The Life and Times of Jesse Livermore, Richard Smitten (1998)

17. The New Money Masters, John Train (1989)

18. My Own Story, Bernard Baruch (1957)