Read “ Common stocks and uncommon profits by Philip A Fisher. Was first written way back in 1956 and retains by and large the main material out of that and has been updated for developments subsequently till the early 80 s. Lengthy introdcution and foreword by son Ken Fosher who himself was a very successful investor.
Warren Buffet was supposed to have taken several ideas of Fisher especially on the growth stocks.
Very insightful and admirable in that quite a number of ideas and propositions put forward by the Author has still a lot of relevance, in fact most of them have relevance. It is quite amazing that the Author talked of Technology and more specifically Electronics and Semi conductors when both were fledgling and when one would not have had much of an idea how they would shape up.
Right through the book there is emphasis on Investment in Companies which have an Insititutional culture like long term goals, R & D , people orientation etc. This at a time when there were talks of labour exploitation etc.
Author talks of long term investment and that too in growth Companies . He is more oriented towards growth in sales and earnings rather than trying to sweep the existing minor variations in valuations that arise out of price play.
He does talk about the buying at the right time but the emphasis is more on Investment research, zeroeing on grothw Companies and buying in to them.
Excellent read.
He talks of the need to balance Dividend distribution and reuse of money for internal growth.
Just listing out 15 Points the Author has mentioned as the basic selection criteria for Investments
1.Does the Company have products or services with sufficient market potential to make possible a sizeable increase in sales for atleast several years ?
2.Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth lines have largely been exploited ?
3.How effective are the Company’s research and development efforts in relation to its size ?
4.Does the Company have an above average sales organisation ?
5.Does the Company have above average profit margin ?
6.What is the Company doing to maintain or improve profit margin ?
7.Does the Company have outstanding labor and personnel relations ?
8.Does the Company have outstanding executive relations ?
9.Does the Company have depth to its management ?
10.How good are Company’s cost analysis and accounting controls ?
11.Are there other aspects of the business somewhat peculiar to the Industry involved which will give the investor important clues as to how outstanding the Company may be in relation to its competition ?
12.Does the Company have a short range or long range outlook in regard to profits ?
13.In the foreseable future will the growth of the Company require equity financing so that the larger number of shares outstanding will largely cancel the existing stockholder’s benefit from the anticipated growth ?
14.Does the management talk freely to investors about its affairs when things are going well but clam up when troubles and disappointments occur ?
15.Does the Company have a management of unquestionable integrity ?
The author talks of scuttlebutt method which essentielly means , checking up about the Companyt with outside experts and more importantly with people who have something to do with the Company and or its products like the Customers, Distributors, vendors , Industry experts etc.
The author alo list 5 Don’s for Investors
1.Don’t buy in to promotional companies
He primarily talsk of Companies getting in to unchartered territories , say new products or new process etc and says that this should be left to specialised financing entities/groups , may be like Venture Cpaital etc.
2.Don’t ignore a good stock just because it is traded “ over the counter”.
This is more liquidity and fear on availability and price call
3.Don’t buy a stock just because you like the tone of its annual report
4.Don’t assume that the high price at which a stock may be selling in relation to earnings is necessarily an indication that further growth in those earnings has largely been already discounted in the price ?
5. Don’t quibble over eigths and quarters.
Author talks of how the small price variations are nothing compared to the kind of growth that we anticpiate and expect to gain. He talks of people putting some arbitray limits for buying whis continues to be a shade lower than the actula market price and how the stock never comes to that pric and lives up to our expectation of growing. The amount we lose is a lot more than the amount we would have lost by paying few pence more
Five more don’ts for Investor
1. Don’t overstress diversification
2. Don’t be afraid of buying on a ware scare
3. Don’t forget your Gilbert and Sullivan, which one understanmds means that do not pay too much attention or give undeserved attention to superficial financial statistics
4. Don’t fail to consider time as well as price in buying a true growth stock
5. Don’t follow the crowd
Attractive part of the book is its relevance even after 50 years. Author touches upon the imporance of margins on sales, ability to grow sales, need for people orientation to keep the morale high for more productive results etc
Warren Buffet was supposed to have taken several ideas of Fisher especially on the growth stocks.
Very insightful and admirable in that quite a number of ideas and propositions put forward by the Author has still a lot of relevance, in fact most of them have relevance. It is quite amazing that the Author talked of Technology and more specifically Electronics and Semi conductors when both were fledgling and when one would not have had much of an idea how they would shape up.
Right through the book there is emphasis on Investment in Companies which have an Insititutional culture like long term goals, R & D , people orientation etc. This at a time when there were talks of labour exploitation etc.
Author talks of long term investment and that too in growth Companies . He is more oriented towards growth in sales and earnings rather than trying to sweep the existing minor variations in valuations that arise out of price play.
He does talk about the buying at the right time but the emphasis is more on Investment research, zeroeing on grothw Companies and buying in to them.
Excellent read.
He talks of the need to balance Dividend distribution and reuse of money for internal growth.
Just listing out 15 Points the Author has mentioned as the basic selection criteria for Investments
1.Does the Company have products or services with sufficient market potential to make possible a sizeable increase in sales for atleast several years ?
2.Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth lines have largely been exploited ?
3.How effective are the Company’s research and development efforts in relation to its size ?
4.Does the Company have an above average sales organisation ?
5.Does the Company have above average profit margin ?
6.What is the Company doing to maintain or improve profit margin ?
7.Does the Company have outstanding labor and personnel relations ?
8.Does the Company have outstanding executive relations ?
9.Does the Company have depth to its management ?
10.How good are Company’s cost analysis and accounting controls ?
11.Are there other aspects of the business somewhat peculiar to the Industry involved which will give the investor important clues as to how outstanding the Company may be in relation to its competition ?
12.Does the Company have a short range or long range outlook in regard to profits ?
13.In the foreseable future will the growth of the Company require equity financing so that the larger number of shares outstanding will largely cancel the existing stockholder’s benefit from the anticipated growth ?
14.Does the management talk freely to investors about its affairs when things are going well but clam up when troubles and disappointments occur ?
15.Does the Company have a management of unquestionable integrity ?
The author talks of scuttlebutt method which essentielly means , checking up about the Companyt with outside experts and more importantly with people who have something to do with the Company and or its products like the Customers, Distributors, vendors , Industry experts etc.
The author alo list 5 Don’s for Investors
1.Don’t buy in to promotional companies
He primarily talsk of Companies getting in to unchartered territories , say new products or new process etc and says that this should be left to specialised financing entities/groups , may be like Venture Cpaital etc.
2.Don’t ignore a good stock just because it is traded “ over the counter”.
This is more liquidity and fear on availability and price call
3.Don’t buy a stock just because you like the tone of its annual report
4.Don’t assume that the high price at which a stock may be selling in relation to earnings is necessarily an indication that further growth in those earnings has largely been already discounted in the price ?
5. Don’t quibble over eigths and quarters.
Author talks of how the small price variations are nothing compared to the kind of growth that we anticpiate and expect to gain. He talks of people putting some arbitray limits for buying whis continues to be a shade lower than the actula market price and how the stock never comes to that pric and lives up to our expectation of growing. The amount we lose is a lot more than the amount we would have lost by paying few pence more
Five more don’ts for Investor
1. Don’t overstress diversification
2. Don’t be afraid of buying on a ware scare
3. Don’t forget your Gilbert and Sullivan, which one understanmds means that do not pay too much attention or give undeserved attention to superficial financial statistics
4. Don’t fail to consider time as well as price in buying a true growth stock
5. Don’t follow the crowd
Attractive part of the book is its relevance even after 50 years. Author touches upon the imporance of margins on sales, ability to grow sales, need for people orientation to keep the morale high for more productive results etc
