Why this order
Idea generation first, then process, then the two books that make a forecast defensible. The two fraud documentaries sit at the end on purpose: scepticism is most useful once you already have a method, and reading them first tends to produce a candidate who distrusts everything and can value nothing.
The 7 of them, in order
1
One Up on Wall Street
Peter LynchEssentialBookStart here
Where an idea comes from. This is the shape of the stock you should be bringing.
What to notice. An edge usually starts as something you already understand better than the market.
The case for buying what you already understand, and the ancestor of every "tell me about a stock you like" answer that actually works.
Where it shows up in a roomWhere it shows up in a room
It is the model for the stock you bring to the room: a business you can explain without notes and a reason the market is wrong.
2
The Smart Money Method
Stephen ClaphamEssentialBookIntermediate
Then the process around it: how an analyst actually spends a week, and how a position gets sized.
What to notice. An analyst’s day is idea generation, evidence and sizing, in that order.
A hedge fund analyst’s working process, from idea generation through to position sizing. The closest thing in print to a job description for a research seat.
Where it shows up in a roomWhere it shows up in a room
Asked how you would spend your first week as an analyst, this is the book that makes the answer specific.
3
Narrative and Numbers
Aswath DamodaranEssentialBookIntermediate
The bridge. Every row in a forecast is a claim about the business, and this is where you learn to defend one.
What to notice. Every forecast row is a sentence about the business.
Where a story becomes a forecast and a forecast becomes a valuation. The bridge between a stock pitch and the DCF sitting underneath it.
Where it shows up in a roomWhere it shows up in a room
Asked to defend a growth assumption, this is where you learn to answer with a business reason rather than a percentage.
4
The Signs Were There
Tim SteerEssentialBookIntermediate
The forensic habit, taught through failures that were flagged in a footnote years early.
What to notice. The warning was usually in a footnote, years early.
Corporate failures traced back to the disclosure that flagged them years in advance. A forensic accounting course disguised as a collection of case studies.
Where it shows up in a roomWhere it shows up in a room
Asked what you read in a set of accounts first, naming a specific footnote and what it would tell you is a complete answer.
5
Enron: The Smartest Guys in the Room
2005EssentialDocumentaryStart hereAn evening
An evening, and the reference point for every earnings quality question you will get.
What to notice. Revenue recognition and off-balance-sheet vehicles can book profit that never arrives.
Mark-to-market accounting and off-balance-sheet vehicles, explained through the company that used both to book profit that never arrived. The reference point for any accounting-quality question you get asked.
Where it shows up in a roomWhere it shows up in a room
Any question about earnings quality or why cash flow matters more than profit has its best example here.
6
The China Hustle
2017RecommendedDocumentaryIntermediateAn evening
Why a short thesis needs primary evidence rather than a screen.
What to notice. A short seller does fieldwork because the filings are the thing in doubt.
Reverse mergers, auditor incentives and how a listed company can have almost no business behind it. The best primer available on why a short seller does fieldwork instead of reading filings.
Where it shows up in a roomWhere it shows up in a room
Asked how you would research a short, this is where the answer stops being a screen and starts being primary evidence.
7
Thinking in Bets
Annie DukeEssentialBookStart here
Last, because a pitch is a bet and interviewers ask about the ones that lost.
What to notice. A good decision and a good outcome are separate things.
Separating decision quality from outcome quality. This is the single most useful idea on the whole list for an investing interview, and the cheapest to acquire.
Where it shows up in a roomWhere it shows up in a room
Asked about an investment that went wrong, the answer that separates the process from the result is the one that gets a second round.