Common Stocks and

Uncommon Profits and Other

Writings.
This book is dedicated to all investors, large and small, who do NOT adhere to the
philosophy:" I have already made up my mind, don't confuse me with facts."
-PHILIP A.
FISHER
 Facts about Philip A. Fisher:-
• Fisher is actually labeled the father of growth investing and he certainly wasn’t keen on statistical bargains
like Graham did.
• Buffett said that he is was “20%Graham and 80%Fisher”.
Books Written by Philip A. Fisher:-
• Paths to Wealth through Common Stocks, Prentice-Hall, Inc., 1960
• Conservative Investors Sleep Well, Harper & Row, 1975
• Developing an Investment Philosophy (Monograph), The Financial Analysts Research Foundation, 1980
• Common Stocks and Uncommon Profits, Harper & Brothers; Revised edition (December 1960)
Quotes By him:-
• The stock market is filled with individuals who know the price of everything, but the value of nothing.”
• “I don’t want a lot of good investments; I want a few outstanding ones.”
• “it is often easier to tell what will happen to the price of a stock than how much time will elapse before it
happens.”
What “Scuttlebutt” Can Do?

• Scuttlebutt in real sense is conducting detailed interviews with

stakeholders, suppliers, customers, shareholders, employees and
competitors about a company's prospects.
• Smart investors, fund managers carry whole database of stocks in
which they have invested.
• Detailed enquiry of stocks help you to delete the dud out of it, as you
know about your stocks and you will be able to spot trouble much
before it becomes big enough to affect the prices of stock.
What to Buy?
The Major questions to Look for in a Common Stock

• Does company have products and services with adequate market potential?
• Is management serious about R&D to develop the next generation of products?
• Do products carry handsome profit margin and proper sales organization that can
be protected?
• Does the company have outstanding labour,personnl relations , depth in
management?
• Is there regular and proper cost analysis and accounting controls?
• Does investor get important clues as to how outstanding the company may be in
relation to its competition?
When to Buy?

• According to traditional discussions on timmings , forcast the business

cycle; is it being postive then buy the stock or vice versa.
Fisher had different views:-
• When growth of a company is in verge of a new product, First plant
comes in stream, Good growth of company falls in difficulties,
incremental investments
 When to Sell And When Not .

• If a stock is well chosen it need never be sold, or atleast not for a very
long time.
• Renowned managers have used the idea of buy and hold approach.
• Do not use stocks as a tradng chip but as a part of ownership in the
business
• Aslo you can sell the stocks when you see there will be a better
opportunities to buy in future.
The Hulabaloo about dividends
hulabaloo:- loud disapproval about something

• Fisher was never intrested in investing in companies yeilding higher

dividends.
• He thought good companies can serve its investors by investing their
funds in growth opportunities rather than returning the same as
dividends to the investor.
• A good growth company wiyh low current dividend yield could offer
signiuficant dividend yield as it enters its growth phase.
Five dont's for investors
• Not to invest in promotional companies like startups, small companies with
excellent growth potential but without any operational or profit performance
history.
• don't ignorejust because PE is high do not ignore such stocks assuming no
further potnetial.
• Don't buy a stock or ignore stocks over lucritive or unlike tone of annual report
presentation , rather then by going over quality of the contents of the report.
• if you have decided to buy a stock in small numbers ,it is better not to wait for
small falls in stock price.
• Don't forget yo conside time and price when buying a true growth stock , even if
you identify a good growth company, it makes sense to wait for the correct time
to buy the same.
 First Dimension of a Conservative Investment
LOW-COST PRODUCTION:-
• Must be the lowest-cost producer in the industry: There are two aspects to this
one . One, the cost should be much lower than the Break Even Point giving the
company a cushion in difficult economic enviornment. Second, it should have
significant profit margin that can finance the organizational growth.
• it should have an excellent marketing organization: A good marketing organization
will understand the changing needs of the customer as well as anticipated changes
in business enviornment.
• it should have a major focus on researching and develpoing new products.
• Should have highly efficient finance and accounting control process.
(Organizations should know its cost elements very thoroughly so that it can focus on products with high marigin, has good budgeting process
that can give early warning to potential problems)
Second Dimension of a Conservative Investment
THE PEOPLE FACTOR:-

• The world in which the business is operating is changing rapidly.

Company must be nimble and flexibleto acccept this challenge.
• The emplyoees should be given proper training and should be told
what and why about the major decisions and quick grivence redressal.
• management should submit itself to the descipline required for
sustained growth.
Third Dimension of a Conservative Investment
INVESTMENT CHARACTERISTICS OF SOME BUSINESS
• From 'Profitability' persepective , the investor should consideron high
and sustained value of ROI and profit margin on sales.
• Four ways to look in ' Safety of Investment' to have a high profit
margin are,
1. Pricing Power
2. Cutting costs using 'Economic Sales'.
(The more the company produces the lower will be the per unit cost)
3. Hving combination of technology and associated service.
4. To maintain Brand Equity.
Fourth Dimension of a Conservative Investment
PRICE OF A CONSERVATIVE INVESTMENT

• Appraisals through which investors should buy stocksand invest in

those companies.
1. Companies doing well in three criterias but have a low PE.
2. Companies doing well in three criterias but have a intrinsic PE.
3. Companies doing wll in three criterias but have a high PE.
4. Companies not doing well in the three criterias should be avoided.
Developing an investment philosophy
• Buy into companies that have plans of ensuring long-range growth. Focus on buying these
companies when they are out of favour in the market
• Hold the stock until there is a change in state like a change in management or if the company
cannot grow faster than the economy. Do not sell expecting the market to correct.
• Do not focus on dividends. Instead focus on capital appreciation.
• Making mistakes is normal in investing. Try to learn from every mistake to become a better
investor.
• There are relatively small number of outstanding companies. Since they are rare, when favourable
situation exist full advantage must be taken of the situation. Have about 12-15 stocks in the
portfolio if you are an individual investor
• Do not go with the crowd. If think that your judgement is correct, have the courage to be
contrarian
• Success in common stock investing depends on hard work, intelligence and honesty.