LESSONS FROM THE BOOK "COMMON STOCKS AND UNCOMMON PROFITS" BY PHILIP FISHER
This book is a seminal work in the field of investing. Fisher's investment philosophy is built around the idea that long-term growth in stock value is more important than short-term profits. He is known for his "Fifteen Points to Look for in a Common Stock," which serve as a qualitative guide to finding well-managed companies with growth prospects. Here's a detailed explanation of some key lessons from the book:
1. The Importance of Quality Management
Fisher emphasizes the significance of a company's management team. He believes that strong, visionary, and integrity-driven management is crucial for a company's success. Investors should look for companies with leaders who are committed to the company and have a clear vision for its future.
2. The Power of Innovation
Innovation is a recurring theme in Fisher's book. He suggests that companies that consistently invest in research and development (R&D) are more likely to create successful products and services that can lead to sustained growth over time.
3. The Concept of 'Scuttlebutt'
Fisher introduces the concept of 'scuttlebutt,' which involves gathering information from various sources about a company to get a comprehensive view of its operations and potential. This includes talking to competitors, suppliers, and customers to understand the company's position in the industry.
4. Long-Term Investment Perspective
Fisher advocates for a long-term investment approach, focusing on companies that show potential for future growth rather than short-term gains. He advises investors to hold onto stocks that continue to meet his criteria and to be patient with their investments.
5. The Fifteen Points
Fisher's famous "Fifteen Points to Look for in a Common Stock" are guidelines for evaluating a company's potential for growth. These points cover aspects such as the company's products or services, R&D efforts, sales organization, profit margins, and financial integrity.
6. The Margin of Safety
While Fisher focuses on growth stocks, he also acknowledges the importance of a margin of safety. This means looking for stocks that are undervalued relative to their intrinsic value, providing a buffer against market fluctuations and investment risks.
7. The Role of Dividends
Fisher is less concerned with dividends than other investment analysts. He believes that for a company with high growth potential, reinvesting profits back into the business can be more beneficial than paying out dividends to shareholders.
These lessons from Philip Fisher's book provide a framework for identifying companies with the potential for long-term growth and profitability. It's a strategy that has influenced many successful investors, including Warren Buffett, who has described himself as part Fisher in his investment approach.
Happy Reading
This book is a seminal work in the field of investing. Fisher's investment philosophy is built around the idea that long-term growth in stock value is more important than short-term profits. He is known for his "Fifteen Points to Look for in a Common Stock," which serve as a qualitative guide to finding well-managed companies with growth prospects. Here's a detailed explanation of some key lessons from the book:
1. The Importance of Quality Management
Fisher emphasizes the significance of a company's management team. He believes that strong, visionary, and integrity-driven management is crucial for a company's success. Investors should look for companies with leaders who are committed to the company and have a clear vision for its future.
2. The Power of Innovation
Innovation is a recurring theme in Fisher's book. He suggests that companies that consistently invest in research and development (R&D) are more likely to create successful products and services that can lead to sustained growth over time.
3. The Concept of 'Scuttlebutt'
Fisher introduces the concept of 'scuttlebutt,' which involves gathering information from various sources about a company to get a comprehensive view of its operations and potential. This includes talking to competitors, suppliers, and customers to understand the company's position in the industry.
4. Long-Term Investment Perspective
Fisher advocates for a long-term investment approach, focusing on companies that show potential for future growth rather than short-term gains. He advises investors to hold onto stocks that continue to meet his criteria and to be patient with their investments.
5. The Fifteen Points
Fisher's famous "Fifteen Points to Look for in a Common Stock" are guidelines for evaluating a company's potential for growth. These points cover aspects such as the company's products or services, R&D efforts, sales organization, profit margins, and financial integrity.
6. The Margin of Safety
While Fisher focuses on growth stocks, he also acknowledges the importance of a margin of safety. This means looking for stocks that are undervalued relative to their intrinsic value, providing a buffer against market fluctuations and investment risks.
7. The Role of Dividends
Fisher is less concerned with dividends than other investment analysts. He believes that for a company with high growth potential, reinvesting profits back into the business can be more beneficial than paying out dividends to shareholders.
These lessons from Philip Fisher's book provide a framework for identifying companies with the potential for long-term growth and profitability. It's a strategy that has influenced many successful investors, including Warren Buffett, who has described himself as part Fisher in his investment approach.
Happy Reading