Common Stocks and Uncommon Profits and Other Writings: 40 (Wiley Investment Classics)

"Common Stocks and Uncommon Profits" is a book written by Philip Fisher, an influential investor and author. First published in 1958, the book provides insights into Fisher's investment philosophy and approach to identifying successful stocks. Here is a summary of its key concepts:

 

1. Scuttlebutt Method: Fisher introduces his unique "scuttlebutt method" of gathering information about companies. He advocates for conducting thorough research by speaking with various industry participants, including customers, suppliers, competitors, and company management. By collecting firsthand information, investors can gain a deeper understanding of a company's prospects and competitive advantages.

 

2. Long-Term Perspective: Fisher emphasizes the importance of taking a long-term view when investing in stocks. He encourages investors to identify companies with strong growth potential, sustainable competitive advantages, and capable management teams. Fisher believes that holding onto such companies over the long term can lead to significant investment returns.

 

3. Qualitative Analysis: The book emphasizes the significance of qualitative analysis in evaluating stocks. Fisher suggests focusing on intangible factors such as a company's innovation, quality of products or services, research and development efforts, and customer loyalty. He argues that these factors often contribute to a company's long-term success and should be considered alongside quantitative metrics.

 

4. Scoring System: Fisher presents a scoring system to evaluate stocks. He identifies key factors such as the company's market position, management quality, financial strength, and growth prospects. By assigning scores to each factor and aggregating them, investors can assess the attractiveness of a company's stock.

 

5. Margin of Safety: Fisher acknowledges the importance of a margin of safety in investing. While he doesn't explicitly use this term, he advises investors to carefully consider a stock's price in relation to its intrinsic value. By purchasing stocks at a discount to their true worth, investors can mitigate the risk of permanent capital loss.

 

6. Management Quality: Fisher places significant emphasis on evaluating the quality of a company's management team. He suggests looking for managers with integrity, a long-term vision, and a history of making sound strategic decisions. Fisher believes that competent management plays a vital role in the success of a company and its ability to generate returns for shareholders.

 

7. Case Studies: Throughout the book, Fisher provides numerous case studies and examples to illustrate his investment principles. These real-life examples demonstrate how his approach to investing has been applied successfully in the past and offer practical insights into stock analysis and portfolio management.

 

"Common Stocks and Uncommon Profits" is a seminal book that offers valuable guidance for investors seeking to identify exceptional investment opportunities. Fisher's emphasis on long-term thinking, qualitative analysis, and gathering firsthand information provides a unique perspective on stock selection. The book remains highly regarded in the investment community and continues to inspire investors around the world.