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Bill Ruane’s Must-Read List for Superinvestors

March 26, 2012 | About:
He is one of superinvestors mentioned by Warren Buffett in his famous Graham-and-Doddsville. The late William J. Ruane I knew had a shining smile that could light up a room when he walked in. Warren Buffett advised associates to invest with Ruane after closing out the Buffett Partnership. William J. Ruane (October 24, 1925, Chicago, Illinois – October 4, 2005, New York City, New York) was one of the superinvestors in Warren Buffett’s Graham-and-Doddvile. Ruane graduated from the University of Minnesota in 1945 with a degree in electrical engineering and from Harvard Business School in 1949. He enlisted in the U.S. Navy and was on his way to Japan when World War II ended.

Ruane met Warren Buffett at an investment seminar with value investing guru Benjamin Graham. They became lifelong friends. Ruane founded his own investment firm, Ruane Cunniff, with partner Rick Cunniff in 1970, and the same year they launched their flagship Sequoia Fund (SEQUX). You can read more about Ruane’s success formula for the investment business.

Ruane’s Top Book Recommendation

Ruane once prescribed an invaluable reading list for aspiring young investors. Can you guess which book would be on top of this list?2129945484.jpg

A little drum roll, please… Ruane suggested aspiring research analysts to read and re-read the entire 1940 (a.k.a the second) edition of "Security Analysis" by Graham and Dodd. This edition was enhanced in 2008 into the new sixth edition with 200 additional pages of commentary from some of today’s leading Wall Street money managers Seth A. Klarman of The Baupost Group and Bruce Berkowitz of Fairholme Capital Management. Warren E. Buffett once told us that he has read the 1940 masterwork “at least four times”!

A year before his passing, I asked the legendary value investor to inscribe something in my 348th copy of a limited 1,000 copy printing of the 1934 edition of "Security Analysis," Ruane wrote: “To Brian: Enjoy the greatest book on research. Bill Ruane.” He later told me that the 1940 edition of "Security Analysis" is even better. Ruane stressed that if you don’t enjoy working with numbers or reading these books, then the business of investing may not be for you. If you do read those books all the way through and have some accounting background to understand what Graham is talking about, then you will know more than 95% of Wall Street.

Warren Buffett’s Top Book Recommendation

Interestingly, we once asked Warren Buffett for his top choice of investment books, and he suggested that "The Intelligent Investor," also by Benjamin Graham, was the best in his mind. And this book happens to be the second on Bill Ruane’s list.

Warren Buffett read the first edition of "The Intelligent Investor" early in 1950, when he was 19. To him, it was like seeing the light. “I thought then that it was by far the best book about investing ever written. I still think it is.” Mr. Buffett later wrote, “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly prescribes the proper framework. … If you follow the behavioral and business principles that Graham advocates—and if you pay special attention to the invaluable advice in Chapters 8 (on Mr. Market) and 20 (on Margin of Safety)—you will not get a poor result from your investments.”

Ruane’s Must-read List of Articles

Bill Ruane also compiled a must-read list of articles from Charles Ellis’ "Classics: An Investor's Anthology" and "Classics II, Another Investor's Anthology":

· The Scope and Limitations of Security Analysis (Benjamin Graham)

· The Concept of Intrinsic Value (Benjamin Graham)

· Definition of Investment (Benjamin Graham)

· The State of Long Term Expectations (John Maynard Keynes)

· The Market and Prices (Adam Smith)

· What to Buy –The Fifteen Points to look for in a Common Stock (Philip A. Fisher)

· When to Sell – And When Not to (Philip A. Fisher)

· Observations on Performance (Warren E. Buffett)

· How Inflation Swindles the Equity Investor (Warren E. Buffett)

· You Pay a very High Price for a Cheery Consensus (Warren E. Buffett)

· Mistakes of the First Twenty-Five Years (Warren E. Buffett)

· Mr. Market, Investment Success and You (Warren E. Buffett)

· How the Terrible Two-Tier Market Came to Wall Street (Carol J. Loomis)

· The Value of Patience (James H. Gipson)

· Margin of Safety (Benjamin Graham)

· US Steel Announces Sweeping Modernization Scheme (Benjamin Graham)

· You Need More Than Numbers to Measure Performance (Robert G. Kirby)

· The Coffee Can Portfolio (Robert G. Kirby)

· An Introduction to Warren Buffett from Ben Graham (“Adam Smith”)

To conduct research on various industries and businesses, Ruane suggested reading all of Value Line and Walker’s Manual of Micro-Cap Companies.

Bill Ruane’s Harvard professor made them read the classic first edition of "Security Analysis" and "Where Are the Customer’s Yachts?" Ruane was taken by investing ever since and eventually made it to Superinvestorville with the reading list above.

About the author:

Dr. Zen
Brian Zen, CFA, PhD, author of "Superinvestor Lecture Notes", serves as Chief Investment Strategist at Zenway Group, a New York-based registered investment advisory firm providing asset management services, training Certified Securities Appraisers (CSA), and teaching Graham-Buffett Value Investing. Previously, Brian served as vice president at JPMorgan Chase and portfolio manager at Prudential-Bache Securities and Janney Montgomery Scott, while teaching graduate-level investment analysis at St. John's University. Brian was a Bernard Baruch Fellow and graduated summa cum laude from Bernard M. Baruch College. He is also a graduate of Columbia University's executive program in value investing. Brian appreciates your feedback at: bzen@zenway.com

Visit Dr. Zen's Website


Rating: 4.2/5 (27 votes)

Comments

cyclop9
Cyclop9 - 2 years ago
Hi Brian,

Walker’s Manual of Micro-Cap Companies I can't find it. It's reported to be out of print.So why are you recommending it?
BrianZen
BrianZen premium member - 2 years ago
It was recommended by Mr. Ruane. Maybe you can find it in old research libraries. If you find any insights there, please let me know.
Cornelius Chan
Cornelius Chan - 2 years ago
To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.I find these kinds of quotes so encouraging - it is hard to put into words. I just finished reading all your articles since 2006. You have made a real contribution that has added value to my understanding of value investing - thank you so much.[b][/b]

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