Vi) What is the company doing to maintain or improve profit margins? Companies can either raise prices or reduce costs. This would be such that the increase in profit margins would be occurring for reasons other than a temporarily expanded volume of business. He argues that the only reason to consider a long term investment in a company with an abnormally low profit margin is that there might be strong indications that a fundamental change is taking place within the company. In fact, these businesses’ profits will also decline correspondingly faster when the tide shifts. V) Does the company have a worthwhile profit margin? He argues that investing in marginal companies (those with a small profit margin compared to competitors) is not the recipe for good long term investments as even if these companies grow profit by a larger percentage than a non-marginal company in a given up year, they only represent an opportunity for a one off gain. Iv) Does the company have an above average sales organisation? For steady long term growth a strong sales force is vital. Iii) How effective are the company’s research and development efforts in relation to its size

Ii) Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited? This point is more about management attitude, it is not a repetition of point one. I) Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years? Fisher doesn’t extrapolate from past revenue patterns but he is interested in understanding how growth can continue into the future. Point 3 – What to Buy – The 15 points to look for in a common stock You do not be to be a top manager to grasp the potential an industry/business has within it. – Asking intelligent questions to people involved in the business/industry of interest is a great way to gain useful investment information. “It is amazing what an accurate picture of the relevant points of strength and weakness of each company in an industry can be obtained from a representative cross-section of the opinion of those who in one way or another are concerned with any particular company.” – The next big opportunity is just around the corner – Costs involved in researching and understanding a businesses are justified The opportunities of today are as good as those of the past. What was required was the ability to distinguish these relatively few companies with outstanding investment possibilities from the more numerous whose future would vary from moderately successful to the complete failure.

He practiced long-term investing, and strove to buy great companies at reasonable prices.Īn analysis of how money was made in the past shows that finding the really outstanding companies and staying with them through all the fluctuations of the market proved far more profitable to far more people than did the far more colourful practice of trying to buy them cheap and sell them high. He specialised in innovative companies driven by research and development. He invested only after he had meticulously sifted through scores of trade journals and other literature and conducted long and detailed interviews with relevant people. Phil Fisher practiced the ‘scuttlebutt’ method of investing. Forager’s junior analyst Alvise Peggion has put together a great little summary of Common Stocks and Uncommon Profits, legendary investor Phil Fisher’s indispensable guide to scuttlebutt investing. And for those of you (like me) that read it more than a decade ago.

Scuttlebutt investing