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My Lovecraft top three would be the following:
#1 The Color out of Space, for all-around creepyness. First Lovecraft story I ever read, before I knew anything about Lovecraft (I was... 15 at the time, I think), and left me shivering. My all-around favorite.
#2 The Haunter of The Dark, for similar reasons.
#3 At the Mountains of Madness. Creepy antarctic terror, claustrophobic. Predates "Who goes there" by seven years. While it lacks the latter's shapeshifting paranoia, I'd argue that overall it's far more creepy (WGT is overall optimistic and not a horror story). I'd also argue that John Carpenter's adaptation successfully merged the former's creepyness into the latter.
- I'm going to make a special mention for the Very Old Folk: While I'd not rank it among the best, I think it's underrated, and I have a soft spot for it because I read it for the first time during a dark and stormy night, in the very city it takes place.
I'm also going to include a Shit Three tier: Stories bad as shit, that must be avoided
- Facts Concerning the Late Arthur Jermyn and His Family
- The Street
- Medusa's Coil
All three are basically racist tracts. Avoid at all costs.
As a bonus middleground, I'll mention two stories that make it out of the scrap above by virtue of not being that bad, in and of themselves, once you get past the bigotry
- Cool Air: It has also obvious racist undertones. Curiously enough, of the same brand of strange bipolar racism that often lies at the core of anti-Spanish prejuice: "Spaniards are short, swarthy and lazy goblins, and their women have beards. Except if you're actually white(r?). Then you're handsome, cultured, and part of the mighty whitey club.". In the story it's particularily blatant because Dr Muņoz gets a pass -which the rest of his countrymen don't- even though he's fucking undead - granted, a particularily friendly sort of undead, but it says something about Lovecraft's racist prejuices when it's worse to be swarthy than to be a zombie
However, despite all this:
I'd say that it's Herbert West- Reanimator done right. Mind you, I think that the critics are unfair on HW-R itself (despite it's flaws, I argue it's nowhere near as bad as they say, and it has some interesting tidbits. It's arguably the first "modern" zombie novel). But Cool Air is better and far more Lovecraftian.
- The Temple: The story's biggest problem is that it goes out of it's way to depict the Germans, particularily the U-Boat commander, as a moustache-twirling villain. I can kind of understand that they were barely out of WWI and that people were still caught in jingoism. Still, it makes you groan every time the U-Boat commander makes some evil reflection in his diary, to underscore how evil he is.
However, despite all this:
If you manage to ignore the anti-German prejuice, it's a pretty darn good horror story about people trapped in a cursed submarine. I'm pretty sure it has inspired -even though it goes uncredited- a number of more modern horror movies and novels.