Book Review: Common Stocks and Uncommon Profits

I am very sure many people have heard of investment guru Mr Philip A. Fisher. By chance, I came across this book called “Common Stocks and Uncommon Profits” at the National Library.

The book wrote about the life of Mr Philip A. Fisher and how he got started into stock investing. During World War II, Mr Philip A. Fisher spent three and a half years in the Army Air Force, engaging in various desk jobs. During this period, he spent his spare time reviewing successful and unsuccessful investment actions that he and other people have taken and came up with certain investment principles.

In this book, Mr Philip A. Fisher shared his investment philosophies such as fifteen points to look for in a common stock.

When to Buy?

1. Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
2. 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?
3. How effective are the company’s research and development efforts in relation to its size?
4. Does the company have an above average sales organization?
5. Does the company have a worthwhile profit margin?
6. What is the company doing to maintain or improve profit margin?
7. Does the company have outstanding labor and personnel relations?
8. Does the company have outstanding executive relations?
9. Does the company have depth to its management?
10. How good are the company cost analysis and accounting controls?
11. Are there other aspects of the business somewhat perculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?
12. Does the company have a short range or long range outlook in regard to profits?
13. In the foreseeable figure will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing shareholders benefit from this anticipated growth?
14. Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur?
15. Does the company have a management of unquestionable integrity?

When to Sell?

1. When mistake is made
2. Company no longer qualifies to the above fifteen points
3. When there is something better to buy

Some favorite quotes or philosophies that I have learnt from this book

“Never promote someone who hasn’t made some bad mistakes, because if you do , you are promoting someone who has never done anything.” – Dr Herbert Dow, founder of Dow Chemical Company

“If you can’t do a thing better than others are doing it, don’t do it at all.” – Dr Herbert Dow, founder of Dow Chemical Company

An excellent read and I give it an excellent rating 5 out of 5 stars.