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- John Huber, a managing partner and the portfolio manager at Saber Capital Management, learned the art of investing through an combination of historical anecdotes and forward-thinking commentary.
- He's widely outperformed the broader market since 2014.
- Huber says the five books listed below got him thinking, and influenced his investment strategy along the way.
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John Huber, portfolio manager of Saber Capital Management, isn't afraid to bet heavily on the ideas and companies around which he holds the most conviction.
As a matter of fact, his fund only holds five to seven stocks at a time, and the top five or six positions make up 80% of the total capital.
"Try to wait until something is so obvious that it sort of hits you over the head," he said in an exclusive interview with Business Insider. "If you only invest in those, I think it goes a long way towards producing better results and you avoid diluting your performance with the 8th, 9th, 10th, 12th, 15th, 20th idea that is sort of there for diversification purposes, but is really taking value away from your best ideas."
In order to select his holdings, Huber leans on facets of a value-based investment approach.
A keen eye is placed on free cash flow, earnings growth, the price-to-earnings ratio, the price-to-book ratio, and book value. Huber then couples these metrics with a long-term holding period to ensure he's not washed out of a position due to an emotional market gyration. In fact, he actually looks for fear in the marketplace to spot opportunities - and purchases shares on the cheap.
That strategy seems to be paying off.
Last year, Huber clobbered the market with a 55% annual return. Zooming out further, it's more of the same. Since 2014, he's widely outperformed the benchmark S&P 500.
Below is a chart of Huber's performance from 2014, before and after fees, juxtaposed against the return of the S&P 500.
Saber Capital Management
Still, Huber's market-pulverizing strategy didn't just fall from the sky. He's fine-tuned it through years of study and real-time practice.
Here are the books that Huber says got him thinking and influenced him along the way.
1. "The Snowball" by Alice Schroeder
"I think obviously the books on Buffett have been very influential to me," he said. "It really teaches you how logical his decision making process was."
He continued: "The book does a really good job of outlining his investment approach."
Huber also notes that Warren Buffett's shareholder letters "have been the best education."
2. "Morgan" by Jean Strouse
"It shows you what worked and what didn't work in the past, and you can sort of learn from people's positive and negative experiences, which I think is really helpful in investing," he said. "A big part of investing is human behavior, so studying biographies of people has been a really helpful exercise for me."
3. "Bull" by Maggie Mahar
"It's the history of the bull market in the 80's and 90's. That's a good book because it outlines some of the euphoria that occurred in the 90's specifically, and just some of the things to watch out for," he said. "You can kind of draw parallels to things today like in the venture capital world or some of the misaligned incentives that you see at certain companies."
4. "Den of Thieves" by James B. Stewart
"I think it's important to read about history, but also specific things that went wrong," he said. "It doesn't really have anything to do with my type of approach to investing, but just to teach you about how incentives drive behavior. That's a great book."
5. "Smartest Guys in the Room" by Bethany McLean and Peter Elkind
"You have to be very wary of a company's financial statements, and you have to look at the cashflow," he concluded. "Enron is a good lesson in that."