"Common Stocks And Uncommon Profits" was originally written by Philip Fisher in 1957 and published a year later. It's a fantastic book on investing that is still very relevant to this day.
Much of Ben Graham's writings (most famously "The Intelligent Investor") focus on the "quantitative" aspects of investing (i.e. looking at the numbers on an income statement or balance sheet) whereas Phil Fisher focuses more on the "qualitative" factors in an investment decision.
What we mean by this is looking at the underlying quality of the business, the management, the Research and Development (R&D), returns on capital, etc.
We think in an ideal world, investors should focus on both of these aspects. It is important to have a good understanding of the accounts and numbers and understand that you are getting good value when you purchase a stock. In "Common Stocks And Uncommon Profits", Fisher's seeks to identify the traits of companies that can have sustained growth with exceptional management and then recommends owning these stocks for a very long time.
Want to know how you - as a member of the general public - might be able to outperform paid professional investors?
If so, then you'll be interested in Fisher's "scuttlebutt" technique.
This is where you gain more insight by talking to important people linked to the possible investment you're looking at.
This may involve talking to present and past employees, to suppliers, to competitors, to customers, and to any other stakeholders. This can help give you a more balanced view than one you simply get from reading the management reports and could give you more clues about the long term potential of the investment.
Interestingly, this "scuttlebutt" technique was also adopted by Peter Lynch who was one of the most successful investors of the 20th century.
Lynch was fond of going about your life with your eyes wide open, seeing where your spouse was shopping, what toys your kids and their friends have, etc etc. These can all provide good insights into underlying trends and potential future investments.
You can also take advantage of your own professional knowledge. For example, if you are a doctor then you are more likely to know about the medical profession, patient drug use, drug quality, etc than some mutual fund manager on Wall Street.
As long as you don't trade on inside information (strictly illegal) then there is nothing wrong with using your superior knowledge to help you in the investment game.
In "Common Stocks And Uncommon Profits", Fisher provides a very simple and thorough framework of ideas for assessing a potential investment, which he calls his "Fifteen Points to Look for in a Common Stock" and it covers ideas such as looking at the market/product potential, growth potential, management skill and integrity, R&D, sales, margins, labor relations and long term thinking.
We think these are all excellent qualitative points that you should think about when analyzing potential investments.
Fisher also gives a couple of lists of "Don'ts for investors". This gives some potential tips for investors such as ignoring previous prices stocks traded at, not following the crowd, not over-diversifying, not falling for flashy management talk, and not thinking long term enough.
The latter editions of this book throw in the bonus of Fisher's other writings: "Conservative Investors Sleep Well" and "Developing An Investment Philosophy." These both expand on Fisher's ideas and give you more ideas to think about as you go about your investing research.
We think this book is a must read for a serious investor and is just as relevant today as it was back in the 1950s. In an ideal world you would consistently add high quality companies to your portfolio that are purchased at reasonable prices. This should give you an excellent chance of long term investment success and "Common Stocks And Uncommon Profits" by Phil Fisher will aid you enormously in identifying those high quality companies.
You can read more about Philip Fisher here.
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