OP’s Reading List
1Sep2007 Filed under: OP's Reading List Author: OptionPundit(for details pls visit www.OptionPundit.net)
The reading list is gradually growing. As you might have noticed I don’t recommend book just for the sake of recommending and earning peanuts from Amazon. Hopefully, I have been able to provide value for your bucks and have added to your ever growing knowledge bank.
Firstly I introduced “The Little Book that beats the Market“. I also gave several examples of real trade on how one can find plays for “option trading” and in fact OPN subscribers know how MRO (one of the results from MFI screens) delivered 33.8% and later 3.1% returns subsequently. This book continues to deliver good results and has over delivered many times and will continue to do so. If you haven’t not used yet, check out the website that delivers fabulous screen, for free. If you haven’t yet signed for guest access, check out Value Investors Club (Open only for 250 permanent members, free, but one needs to work hard to get the membership). The author, Mr. Joel Greenblatt, has brilliant track record, second only to Mr Warren Buffet.
Then I recommended “Option Trading: The Hidden Reality“. This was the only book that was above $20. As I mentioned, this is not meant for beginners. One needs to have a good understanding of what options are? Once understood, then purchase this book which takes you to new heights in the options trading world. It’s not an easy book. Charles Cottle, the author, also offered 10% discount to those who buy under “OptionPundit” code. I am wholeheartedly recommending to buy from Risk Doctor so he is rewarded for great efforts. For those who don’t know Charles, read his impressive profile.
A Guide to Economic Indicators by Economist was another addition to this library. I don’t think I could have interpreted weekly economic data published by several institutions worldwide without help of this amazing book. This is like dictionary that is alongside with me all the trading time.
Mohnish Pabrai, who runs over US$400million funds based on inspiration from Warren Buffet and Charlie Munger recently published, The Dhandho Investor, that outlines a framework. He doesn’t necessarily talk about how to evaluate a business (which many think that this book is about), rather he lays out a framework for “Character of Value Play”. A resourceful book to find good play.
I also recommended a book for speculative trading by being ahead of the market. Of course the book is not intended for option trading, but there is one particular event that happens 4 times in a year i.e. earning announcements where this book can be used. No one can predict exactly how earnings are going to be, but this does provide a good hint and one needs to prepare well for either direction. It does help to increase chances of success.
Do let me know how did you like reviews or if you would like me to review from some different point of view,
Profitable Trading, OP
OPs Reading List4 Responses to “OP’s Reading List”
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dayton
September 1st, 2007 at 6:32 pm
LITTLE BOOKS THAT BEATS THE MARKET : Does not gives the reader any methods to value businesses on his own. It is written to popularize Joel Greenblatts website. The website does gives good companies that you can buy. But you still don’t know how these magic formulas are working. How can you pencil the whole thing when the authors donot provide that information ? Its the very essence that these guys are buying with, yet they don’t give you the same knowledge. Bit selfish?
DHANDO INVESTOR: This another great book, tells you all about buying business at 50 cents, but witholds information how you can fish on your own. You need to become authors lackey or join his fund to find out!
RULE#1 by PHIL TOWN: Delivers exact hands on methodology so you can value a business withing minutes from MSN Money and the free websites and go fishing on your own. Written by a Warren Buffet devotee, shows you how Warren Buffet does his calculations and numbers.
You won’t need the author or the book to depend on. I guess I like to fish on my own and its a highly suitable read. Very detailed, very easy read , and gets down to small details and nuts and bolts.
This book leaves other books in the dust.
dayton
September 1st, 2007 at 6:44 pm
HIDDEN REALITY by Charles Cottle:
I downloaded the first chapter for free. Its a nightmare of a read. Its not something you can understand or follow unless you are a pit trader or some kind of an Option whacko. Its a hard read. Nice graphs etc and some exotic option strategies such as SKIP STRIKE BUTTERFLIES and PREGNANT BUTTERFLIES where 2000 butterflies are embedded in the trades!
I mean do you want to get that complicated and entangled in exotic stuff that you lose sight of making money? I did not order this book, as it may be just too hard on my digestive system.
In lieu of that, if one uses ” OPTIONS AS A STRATEGIC INVESTMENT” by Larry McMillan he can pretty much do a very good job of understanding various strategies and won’t throw up digesting these things.
OptionPundit
September 1st, 2007 at 8:56 pm
Dayton, as you have very strongly suggested Rule#1 book, I will read it. I have read amazon reviews and those are also a mix so I will reserve my comments. If this really teaches how to fish, then great. I will add this in my reading list as well.
Hidden reality, I had mentioned earlier, is not an easy book. I have successfully used pregnant butterfly trade many times and I have a full trading plan devoted to just that strategy. It’s all about concepts and once those are cleared, I don’t think it’s then so complicated. OSI by Larry is also a great book. No second thoughts.
Little book and Dhandho. I think it provides a good framework. Little book works on two simple parameters Earnings Yield and Return on Capital and ranking stocks based upon that. There are tons of websites where from one can make good use of this.
Valuing business is an art as well as science, and everybody has their own way of doing research. Warren Buffets’s methodology is no secret, thousands of books have been written, but still there is no other Warren Buffet (yeah some potential candidate, but still a long way to go). There are even web-sites which can automatically calculate “Intrinsic Value” of the business, but I don’t think an intelligent investor will invest just based on that. It’s a starting point.
So these are frameworks that provides concepts, IMHO. The “Art” is still up-to individual.
Cheers, Profitable Investing.
dayton
September 1st, 2007 at 10:21 pm
PHIL TOWN is a Warren Buffet devotee. He named his book after Warren Buffets Rule#1 .
What he does is very simple and nothing complicated, high school math and calculators on his website give you the numbers to arrive at the intrinsic value of a company (which is not the stock price). Here are 3 businesses that I calculated being undervalued now. Once you get the hang of it, it takes few minutes to arrive at the valuation.
PCU
HD
STLD
What it focuses on is that you try to make at least 15% a year return on your investment and if you could do that, you would be making lots of money. That 15% is very conservative , you can do lot more. It also tells you to trade with Technical indicators with the market. That is you don’t sit there like sheep and get slayed when the stocks are being sold. Its tells you to exit and wait for another good entry.
Problem is people don’t know how to value a company what its worth, not what the stock price is. Stock price can be seriously misaligned. Dhando Investor and Little Book seriously disappointed me. I wanted to know how to fish on my own.