We've been asking for your favorite investing books for the past few weeks, and the results are in!

In this episode of Industry Focus: Financials, host Gaby Lapera and contributor Matthew Frankel talk about a few of the books from the list that they've read before. Find out why Peter Lynch's One Up On Wall Street is so highly and consistently recommended for individual value investors, how Thinking, Fast and Slow by Nobel Prize-winning psychologist Daniel Kahneman can help you make better investing decisions, and more.

Don't forget to email us at industryfocus@fool.com for the full list!

A full transcript follows the video.

This podcast was recorded on Dec. 19, 2016.

Gaby Lapera: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. You're listening to the Financials edition, taped today on Monday, Dec. 19th, 2016. My name is Gaby Lapera, and joining me on the phone is Matt Frankel, one of The Motley Fool's top business analysts and personal finance specialist. How is it going, Matt?

Matthew Frankel: Good, thanks for having me.

Lapera: We are definitely excited to have you here. Everyone, today's show it's our second annual just-in-time-for-the-holidays book show. I don't know what holidays you might celebrate. I personally celebrate Christmas. I believe, Matt, you celebrate both Christmas and Hanukkah?

Frankel: Yes, we're a mixed household down here.

Lapera: Very exciting. I believe, one of the days of Hanukkah falls on Christmas this year, right?

Frankel: Yeah, it's one of the rare years where the two overlap.

Lapera: Perfect, this is great, if you celebrate Christmas and/or Hanukkah and/or Kwanzaa and/or Festivus, or you just want to give someone a nice gift in a totally non-seasonal way. (laughs) So, books. Why do we do the book list? One, because I think it's fun. Two, because the most important thing I think you can give people is knowledge, or the means of educating themselves, and that's one of the only gifts that can be with someone for forever. Not to mention that education helps to make better world citizens -- that's also another really great benefit from it. Books can change people's minds, take them to new worlds, and educate people, and that's super exciting.

Frankel: Definitely.

Lapera: Right? So, every year -- (laughs) for the last two years, I should say, and hopefully next year as well, I'm really hoping this will be an annual thing -- we have put together a book list to help you help the people in your life. Maybe they're really annoying and you want them to know a little bit more, and you can give them one of these books. I do want to mention that this year, we sourced ideas from listeners. Thank you to the approximately 30-ish people who wrote in or Facebooked in. I do want to warn you that there are some books on the list that no one at the Fool has heard of, so we're not personally vouching that everything on there is great. But even if there's a hinky recommendation, that's good -- maybe you'll read something and think, "Hmm, that's not quite right," and it'll encourage you to go do research and learn for yourself, and that is the top skill that American colleges are trying to teach right there -- critical thinking and analysis. So, there you go, free education double whammy. But, overall, I trust y'all, and I'm sure that all of the recommendations -- well, I hope that all the recommendations -- are great.

With that, I would like to turn to Matt Frankel. What is one book that has really helped you as an investor?

Frankel: My personal favorite when I got started was One Up On Wall Street by Peter Lynch. It's unique in that it breaks down the advantages that small investors have over big hedge funds and big investors. He goes into a discussion of using the power of your own knowledge to find investments and evaluate stocks. He goes into a good description of stock analysis as well, just kind of the basics, evaluating the P/E ratio (price/earnings), how to interpret insider buying and selling, that kind of thing, how to categorize stocks, and very importantly for beginners, how to manage your expectations, and how to differentiate investing and speculating.

Lapera: That's very important for beginners, like, one of the most important things that you can hopefully learn when you first start.

Frankel: Yeah. I've heard from a lot of my friends who read my writing but aren't really investors yet, things like, "Why don't you just put all of your money in this stock you think is going to triple in the next two years?" This book answers questions like that. Just using the power of what you know already to make investment decisions.

Lapera: Yeah, One Up On Wall Street is a very Foolish book.

Frankel: Definitely. My favorite quote of his from the book is that he tries to think like an amateur whenever possible, and that's what he credits his success to, in that large investors are inherently at a disadvantage because they have to invest in big companies, large stocks, the normals. He delves into how to spot trends before the analysts do by stuff like, at the store, looking at what people are buying, and that sort of thing.

Lapera: Yeah, that is exactly right. It's a great book. I think that -- I'm not 100% sure, I should have listened to last year's show -- I think that might have been the book I recommended last year. (laughs) So, I also approve of that book, listeners. And that book is on the book list this year, as well. There are some classics that are going to show up every year, so don't be angry if there's a couple old titles this year from last year. I think that just happens when books are really great. The book that I am personally recommending this year is a book by Daniel Kahneman, who actually won the Nobel in economic science in 2002. This book is also on the list, it was recommended by a listener, Jason from Richmond, you'll see his name a lot on the list. The book is called Thinking, Fast and Slow. Daniel Kahneman is actually a psychologist, technically. Maybe he's an investor in his personal life, I'm not 100% sure. 

But the whole point of the book is, humans have two different ways of thinking. One is fast, we make assumptions, we just make a decision, and that is the more emotional part of our brain. The other way of thinking is more analytical and slow. But the problem is, sometimes we think we're thinking analytically and we're not. He helps unpack how we do that, and how to make more reasoned decisions, which I think is huge for investors. I think one of the biggest problems in investing is how emotional it can be. And we don't even realize it. The other day, I was talking to a friend of mine, and he was just like, "I just have a good feeling about that company." And I was like, "OK, but why?" And he was like, "I don't know, they just sound good to me." It's like, that's not a good reason to buy a company! And that's a very obvious example of emotional thinking, but there's all sorts of things, like when the market goes down and you just sell a company because, "The company's gone down! Oh no!" But there's nothing fundamentally wrong with the company, you're just selling because everything's down. And that's the worst time to sell, because everything is down, you're not going to make as much money.

Frankel: Right, psychology is actually one of the biggest obstacles for new investors. There was a study done where the average investor only returns about 3% per year, less than a third the average return of the S&P. The main reason was they do the opposite of what they should. They buy when everybody else is buying, and the sell when everybody else is panicking. And this is a book that could help correct that.

Lapera: Definitely. I really liked it. I think listeners know that I kind of have a science-y background. By "kind of," I mean I have a science background. So, of course this one super appealed to me. But, I also think, like I said, it's very valuable for new investors. Just to give you a quick preview of some of the other books on the list -- and Matt, we can do free association. I'll say a book, and you say the first few words to sentence that comes to mind.

Frankel: I'll give it my best shot.

Lapera: Let's start with The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success. First, have you heard of this book?

Frankel: I have heard of it, I have not read it yet, though.

Lapera: OK, well, let's not do that one then. How about The Intelligent Investor?

Frankel: My second-favorite all time. Not too much into the psychology. It's the best discussion of value investing I've ever read.

Lapera: Definitely. And that was actually the most recommended book this year by far, followed by One Up On Wall Street, you'll be happy to know.

Frankel: For more advanced investors, Graham's other book, Security Analysis, is another good choice.

Lapera: Good to know. That is actually not on the list. Keep that in mind, listeners.

Frankel: It's some more advanced discussions.

Lapera: How about Snowball? Have you read this? It's the Warren Buffett book.

Frankel: Yes, I read it a long time ago.

Lapera: The Snowball: Warren Buffett and the Business of Life. It has a very dramatic title. I've actually not read that book, so I don't know what the snowball reference is.

Frankel: There are only a few really good Buffett books I'd recommend. Another one is called Buffett: The Making of an American Capitalist by Roger Lowenstein.

Lapera: Oh, yeah, we actually had him on the show! I don't know if you heard that show. Roger Lowenstein, not Warren Buffett. (laughs) 

Frankel: That's another really good discussion about how Buffett's mind works.

Lapera: Yeah. We have quite a few books that are kind of like "titans of X industry" type books, which I think are interesting, I love biographies, but I know they're not quite everyone's...slice of pie? That's not the phrase, but it'll come to me eventually, after the show is done. OK, last one, Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor by Seth Klarman.

Frankel: Another great book on a Buffett-ish topic. Margin of safety is one of Buffett's biggest allies. He invests in things he perceives to be undervalued. Margin of safety is figuring out how much bad economy your stocks can absorb, like, if another crash comes, how much could the market go down before the stock would still be worth more than you paid for it?

Lapera: Yeah, definitely. I don't know if you've read this book, but this is a tome. It is a long, long book. And I think it's actually the most expensive book on the list, because it's technically out of print, so it's in the hundreds of dollars. But a lot of investors recommend it. So if you are very committed to value investing, maybe consider borrowing it from your library, if they have it, or attempting to buy it on Amazon. One last fun one, Moneyball: The Art of Winning an Unfair Game. Have you read this book?

Frankel: Yes.

Lapera: Yes. It's by Michael Lewis. It's a great book.

Frankel: And the movie was actually really good, too.

Lapera: Yeah. The point I'm trying to get to here, listeners, is that we have everything from Seth Klarman, basically, I believe the listener who wrote in about that book was basically a Masters in investing, if you are a value investing freak, to Moneyball, which is kind of a fun book. Michael Lewis knows what he's talking about, but he's also a really fun and easy-to-read writer, I think. I think almost any Michael Lewis book that you pick up is worth it. Although, this is the only Michael Lewis book we have on the list this year. 

So, listeners, I want to wish you guys a happy holiday of your choice. Merry Christmas to my parents, because I know they celebrate Christmas. Happy Hannukah and Merry Christmas to Matt. Happy Festivus to my friend Andrea Blakemore out in San Francisco. Thank you, guys, very much for joining us for this show. Just so you guys know, next week we are not doing any live shows, it's all going to be repeats from earlier this year. They're still going to be great. We tried to pick some of our most interesting shows -- at least, I did. I don't know, maybe the other guys picked terrible shows. If they did, feel free to write in and tell them they were terrible. You can do that at industryfocus@fool.com. If you want this book list, email us at industryfocus@fool.com. I will try to get it out to you as soon as possible. Just so everyone knows, as usual, people on the program they have interests in the stuff they talk about, and The Motley Fool may have recommendations for or against, so don't buy or sell stocks based solely on what you hear. Again, contact us at industryfocus@fool.com, or by tweeting us @MFIndustryFocus. If one of those books is terrible, let me know. I will probably not take it off the list, because I think it's important for people to read things that they don't agree with. But I will know, and I will probably agree with you.

Thank you to Austin Morgan, who put together this show. We're in a time crunch, and he's looking at me like, "Oh my God, hurry up, they're trying to come in here and fix the studio!" And, thank you to everyone for listening. Just on a personal note, I've been doing this show for about a year now, and it's been really satisfying, and one of the best parts is getting emails from you guys, and the book list always brings out a lot of emails. Thanks guys, for being, I hope, kind of loyal listeners, (laughs) and for listening to me for a whole year. At least no one's written in and been like, "Get out!" yet. (laughs) And, thanks to Matt for joining us again!

Frankel: Yes, thank you for having me!

Lapera: Awesome. All right, everyone, have a great week!