Teachings from Common Stocks and Uncommon Profits and Other Writings by Philip A. Fisher
Timeless investment wisdom from a legendary investor
Common Stocks and Uncommon Profits and Other Writings Summary
In the early 1960s, investment guru, Philip A. Fisher wrote one of the most influential books about investing, "Common Stocks and Uncommon Returns." In this investment classic book, he laid out a simple strategy that helped him beat the market for long-term investment success. All during a period when few investors could do so. But Fisher didn't just talk about how to invest; he lived what he preached.
The original version of "Common Stocks and Uncommon Returns," published in 1963, sold 20 million copies. Now, nearly 50 years later, we can read Fisher's timeless investment philosophy in a brand-new edition.
In addition to Fisher's classic text, this edition includes dozens of never-before-published stories about Fisher and his family, including letters from readers.
You'll learn why Fisher thought some investments were too risky to make, and why others were worth taking a chance on. You'll hear about Fisher's unorthodox approach to trading, and discover why he believed that even small gains could add up to big profits. And finally, you'll find out how Fisher managed to keep his investment portfolio intact while losing millions of dollars in the stock market crash of 1987.
This book is packed with insights into the life and work of one of America's greatest investors.
Who Is Philip Fisher
Phil Fisher was born in 1883 in New York City. He graduated from Harvard University in 1906 and earned a law degree there in 1909. After graduation, he joined the investment firm of J. P. Morgan & Co., where he worked for several years.
In 1913, he began working at Kidder Peabody & Co., where he remained for the rest of his career. While at Kidder, he became friends with Benjamin Graham and David Dodd, both of whom are considered pioneers of modern portfolio theory. His investment wisdom is still as practical today as it was 50 years ago... And that's why he is known as one of the most influential investors of all time.
And in fact, it's reported that the world's most successful investor Warren Buffett identified his investing strategy as "85% Graham and 15% Fisher." High praise from the Oracle of Omaha himself.
Fisher's son, Ken Fisher also went on to found Fisher Investments - one of the largest investment firms around today.
What Is The 15 Point Strategy Found In Common Stocks And Uncommon Profits?
The point strategy is one of my favorite investing strategies because it finds investment opportunities with great potential while avoiding those that are likely to fail. This is accomplished by finding companies that have been around for a number of years and have established themselves as market leaders. These companies typically have a proven track record of profitability and growth.
In addition, the point strategy focuses on buying individual stocks in companies with solid financial records. Many times, these companies have already generated profits, so there is little risk involved. Finally, the point strategy looks for businesses that have been able to maintain consistent earnings growth over several quarters. Companies that grow consistently tend to generate steady cash flow, which makes them attractive investments.
Here are the 15 points as they are laid out:
Does the company have products or services with sufficient market potential to make possible a sizeable increase in sales for at least several years?
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?
How effective are the company's research and development efforts in relation to its size?
Does the company have an above-average sales organization?
Does the company have a worthwhile profit margin?
What is the company doing to maintain or improve profit margins?
Does the company have outstanding labor and personnel relations?
Does the company have outstanding executive relations?
Does the company have depth to its management?
How good are the company's cost analysis and accounting controls?
Are there other aspects of the business, some
In the late 1980's, Buffett began identifying himself as being 85% Graham and 15 % Fisher.
what peculiar to the industry involved, which will give the investor important clues as to how outstanding the company will be in relation to its competition?
Does the company have a short-range or long-range outlook in regard to profits?
In the foreseeable future, will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders' benefit from this anticipated growth?
Does the management talk freely to investors about its affairs when things are going well but "clam up" when troubles or disappointments occur?
Does the company have unquestionable integrity?
According to Philip Fisher's Strategy, What Are Valid Reasons to Sell a Stock?
A valid reason to sell a security includes an incorrect analysis of fundamental factors. An investor should consider selling stocks if there is a change of those fundamental factors. This is a valid reason to sell.
But Fisher says that investors often sell stocks based on what he calls "the Wall Street myth." This is the idea that if a stock falls too much, something must be wrong with the company.
This isn't necessarily a good reason to sell. He explains that if a stock falls, it could be due to many things. For example, it could be due simply to the fact that the market has become oversold. Or, it could be that the company's earnings report disappointed investors.
If you are considering selling a stock because it has fallen too far, it might be best to wait until it recovers. This could be an important concept to remember now... At the time of writing stocks are about 30% off their highs. And many tech stocks are 80% - 90% off their recent highs.
Yes, stocks got ahead of themselves in 2021. But we're not in that environment. It's important to judge a company by its investment potential today. For long-term investors, it's important to double check the fundamentals of a company... Especially if it is down in a big way from its highs.
The reality could be that some great companies got thrown out with the rest of the trash. And soon the market will realize some companies are undervalued. But this takes time. And this is why some companies' shares fall even though they are doing well.
Should You Read This?
If you want a practical book full of do's and don'ts for investors, this is for you. Philip Fisher, and his son Ken Fisher, were among the best investment advisors of the 20th century. Their investment decision process carries wait today among experienced investors and conservative investors.
This book lays the foundation for finding those individual stock picks that will outperform the market... All while surviving market downturns. Individual investors and professional investors alike can benefit from reading this book from legendary investor Philip Fisher.