I am reading "Investing: The Last Liberal Art" by Robert Hagstrom (famous for writing "The Warren Buffett (Trades, Portfolio) Way," among others). The book is the second edition; the first one had another title, "A Latticework of Mental Models." While the current title is definitely more appealing, the latter makes a better description of the book's contents. What the book intends to do is describe, from the viewpoint of the main sciences, the core ideas and most powerful mental models in a practical way.
One of the most interesting viewpoints I have encountered is the one from biology and the concepts of adaptive systems and evolution. As a quick summary, the author emphasizes ideas from Darwin, among others, to describe the different investment strategies that have been dominant over the years. During the 1930s and 1940s, the discount-to-hard-book value strategy was in full swing. After WWII, the dividend model strategy dominated the markets. During the 1960s, companies experiencing high growth gathered the attention of the market. During the 1980s, the "owner earnings" model was widely implemented. Today cash return on invested capital is one of the preferred methods among investors. Continue Reading »