Common Stocks and Uncommon Profits
A guide to finding long-term growth stocks and the philosophy behind successful investing.
Summary of 7 Key Points
Key Points
- Scuttlebutt Method for Company Research
- Fifteen Points to Look for in a Common Stock
- Conservative Investors Sleep Well
- Growth Stocks vs. Value Stocks
- When to Sell a Stock
- The Importance of Management Quality
- Five More Don’ts for Investors
key point 1 of 7
Scuttlebutt Method for Company Research
The Scuttlebutt Method is a research approach emphasized by Philip Fisher in assessing the potential of a common stock. Fisher suggests that investors should go beyond conventional sources of information like annual reports and instead engage directly with stakeholders connected to a company. This involves speaking with customers, suppliers, and competitors to gain a nuanced understanding of the company’s standing in its industry, the quality of its products, its competitive advantages, and its reputation. Fisher believed that these conversations often reveal insights that are not available through traditional financial analysis or readily available public information…Read&Listen More
key point 2 of 7
Fifteen Points to Look for in a Common Stock
The author emphasizes the importance of a company’s potential to increase sales over the years in developing a superior growth record. This growth should ideally be reflected in the sales figures, which are considered more difficult to manipulate than earnings. The growth in sales serves as a strong indicator of a company’s ability to expand and succeed. The author recommends seeking out companies with a consistent record of substantial growth in sales, as this often leads to corresponding increases in earnings…Read&Listen More
key point 3 of 7
Conservative Investors Sleep Well
Philip Fisher, in his investment philosophy, emphasizes that conservative investors should focus on companies with strong potential for growth while still being able to sleep well at night. This perspective is grounded in the idea that investing in solid, well-managed companies with good growth prospects can lead to substantial long-term gains without taking on excessive risk. Fisher suggests that conservative investors need not sacrifice growth for safety if they choose their investments wisely…Read&Listen More
key point 4 of 7
Growth Stocks vs. Value Stocks
The distinction between growth stocks and value stocks is a fundamental concept in the investment philosophy discussed. Growth stocks are characterized by their potential for above-average earnings growth, often due to unique products or services, technological advantages, or superior business models. These companies are expected to grow at a faster rate than the overall market, which may lead to higher stock prices over time. Investors who focus on growth stocks are willing to pay a premium for the anticipated increase in earnings and are less concerned with the current dividend yield or price-to-earnings ratios…Read&Listen More
key point 5 of 7
When to Sell a Stock
Philip Fisher, in his investment classic, articulates that the decision to sell a stock is as crucial as the decision to buy. Fisher suggests that there are only three primary reasons to sell a stock: fundamental deterioration, a severe overvaluation due to general market euphoria, or a better investment opportunity has arisen. He warns that selling should never be based solely on the stock price movements or short-term economic outlooks, which can often be misleading…Read&Listen More
key point 6 of 7
The Importance of Management Quality
In assessing the potential of a company, the quality of its management team is paramount. The author emphasizes that even businesses with strong market positions and products can falter under poor leadership. Conversely, a strong and capable management can drive a mediocre company to success. He stresses the evaluation of a management’s integrity, arguing that trustworthy leaders are essential for long-term investment prospects. The ability to trust that the management will act in the best interests of the shareholders is seen as a cornerstone of any investment decision…Read&Listen More
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Five More Don’ts for Investors
Philip Fisher, in his work, articulates a set of ‘don’ts’ for investors to consider which can be as crucial as any strategic ‘do’s’. One of these ‘don’ts’ is to avoid buying into promotional companies. He warns that these companies often do not have a secure and unique advantage in their respective industries. Instead, they rely on promotions and potential market hype which does not guarantee long-term value in the investment. Fisher asserts that the soundness of the investment should be based on concrete business performances and prospects, not promotional narratives…Read&Listen More