Book notes of Fisher’s “Common Stocks and Uncommon Profits and Other Writings”
Here’s a concise summary of Common Stocks and Uncommon Profits by Philip A. Fisher: – from ChatGpt
Book Summary: Common Stocks and Uncommon Profits by Philip A. Fisher
Philip Fisher’s classic investment book, first published in 1958, lays the foundation for growth investing and emphasizes understanding a company’s business fundamentals, management quality, and long-term growth potential. The book is divided into three main sections: investment philosophy, techniques, and principles.
1. The Fisher Philosophy
Fisher argues that successful investing goes beyond analyzing financial statements. Instead, it requires a deep understanding of a company’s competitive position, growth potential, and management quality. His philosophy revolves around:
•Long-term growth: Focus on companies with durable growth potential rather than short-term market fluctuations.
•Quality over quantity: Invest in a few outstanding companies instead of diversifying across average ones.
•Thorough research: Use a detailed investigative process to identify high-quality businesses.
2. The Fifteen Points to Look for in a Stock
At the heart of the book are Fisher’s 15 qualitative criteria for evaluating a company, which form the basis of his “scuttlebutt” approach (gathering information from diverse sources like employees, customers, and competitors). These points fall into three categories:
A. Characteristics of a Company’s Business:
1.Significant Market Potential: Does the company address large, expanding markets?
2.R&D Capability: Is the company innovating to meet future needs?
3.Sales Organization: Does the company have an effective and scalable sales team?
4.Profit Margins: Are profit margins consistent or improving?
5.Cost Controls: Can the company maintain or improve efficiency as it grows?
6.Customer Relationships: Are customers highly satisfied and loyal?
7.Competitive Position: Does the company have a durable competitive advantage?
B. Quality of Management:
8. Integrity and Vision: Are leaders honest and forward-thinking?
9. Retention of Talent: Does the company retain top executives and foster internal growth?
10. Openness to Change: Is management flexible and adaptable to new trends?
11. Capital Allocation: Does the company reinvest profits wisely into growth or distribute them appropriately?
C. Long-Term Financial Health:
12. Conservative Financing: Is the company’s debt manageable?
13. Dividend Policy: Does the company prioritize reinvesting for growth over high dividends?
14. Growth Mindset: Is management focused on long-term growth rather than short-term results?
15. Strategic Planning: Does the company think ahead to anticipate risks and opportunities?
3. The Scuttlebutt Method
Fisher emphasizes gathering insights directly from people connected to the company. This includes interviewing customers, suppliers, and employees to get a well-rounded perspective. He argues that qualitative insights often reveal opportunities that quantitative analysis alone cannot.
4. When to Sell a Stock
Fisher provides clear guidelines on selling stocks:
1.If the company’s fundamental growth prospects deteriorate.
2.If a better investment opportunity arises, offering greater long-term potential.
3.If you’ve made a mistake in assessing the company’s business model or growth potential.
Importantly, Fisher advises against selling based on short-term price fluctuations or fear of market corrections.
5. Common Mistakes Investors Make
Fisher identifies key pitfalls to avoid, including:
1.Over-diversification: Spreading investments too thin can dilute returns.
2.Overreliance on P/E Ratios: A high P/E ratio may reflect quality and growth, not overvaluation.
3.Short-Term Thinking: Avoid focusing on quarterly earnings or market timing.
4.Ignoring Management: A great company with poor leadership can falter.
6. The Power of Patience
Fisher emphasizes the importance of holding stocks for the long term. A superior business will compound wealth over decades, provided it remains competitive and well-managed. Investors must focus on enduring business fundamentals rather than market noise.
Key Takeaways
•Focus on growth: Identify companies with long-term potential to grow revenues and profits.
•Deep research matters: Use the scuttlebutt approach to uncover qualitative insights about a business.
•Think long-term: Great businesses create wealth over time; avoid short-term speculation.
•Invest in quality management: Strong leadership drives sustainable growth and shareholder value.
Legacy and Influence
Philip Fisher’s principles have influenced generations of investors, including Warren Buffett, who acknowledged Fisher’s contribution to his own investment philosophy. Fisher’s focus on qualitative analysis and long-term growth remains a cornerstone of modern growth investing.
This book is a must-read for anyone looking to master growth investing and build a portfolio of “uncommon profits” by identifying extraordinary companies early in their growth journeys. Let me know if you’d like more details about any specific section!
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one book note and example from OSV Fisher 15 Point Checklist_ AeroGrow (AERO)
another book note from OSV – a few examples15 Points Checklist
book note for whole book book_note_of_common_stocks_and_unc
