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In this Common Stocks and Uncommon Profits review, we dissect Philip Fisher’s enduring insights and reveal actionable lessons for today’s investors. We’ll elaborate on Fisher’s famed 15 point checklist, scuttlebutt research, long term growth focus, and disciplined selling approach.
Lesson 1: Evaluating Growth Potential with the 15 Point Checklist
Fisher’s 15 point checklist is designed to identify companies with sustainable, long-term growth. Let’s explore how each point delivers unique insight:
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Chapter 1-3: Products, Innovation, and R&D
These points assess whether a company not only has strong products but an ongoing commitment to innovation. Fisher advises considering market potential, followed by whether management continually seeks to expand. Effective R&D efforts demonstrate a forward-thinking ethos beyond mere cost-cutting
Chapter 4-6: Sales Force, Profit Margins, and Cost Controls
A robust sales organisation and above-average profit margins suggest operational excellence and scalability. Fisher in his book “Common Stocks and Uncommon Profits” also stresses ongoing efforts to maintain/improve margins, not just relying on past success
Chapter 7-9: People, Culture, and Leadership Depth
He highlights the importance of labour relations, executive team dynamics, and depth in management. Companies with healthy workplace culture and strong second-tier leadership are less vulnerable to turnover disruptions
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Chapter 10-12: Accounting, Competitive Edge, and Profit Outlook
Reliable accounting controls reflect transparency. Fisher’s emphasis on niche advantages and a long-term profit outlook positions companies for enduring success
These principles ensure that growth won’t be derailed by excessive dilution, poor communication, or lack of managerial integrity, core traits that define Fisher’s model of quality stock selection
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Lesson 2: Mastering Scuttlebutt Research
The scuttlebutt method is Fisher’s qualitative research cornerstone, digging into real-world perspectives from customers, suppliers, and former employees. Fisher in his book “Common Stocks and Uncommon Profits” believed this method often revealed management integrity, corporate culture, and competitive edge far better than financial statements alone
Today, investors can harness platforms like LinkedIn, forums, and trade organisations to build a deeper understanding of a company’s inner workings, true qualitative analysis of stocks.
Lesson 3: Growth Investing Through a Long-Term Lens
Fisher’s “Common Stocks and Uncommon Profits” is widely credited as a pioneer in growth investing. He insists on investing in businesses that can compound earnings over decades, not just temporary rebounds.
His approach aligns with modern investor principles like long-term investment, compounding returns, and growth stock strategy:
- Identify businesses with scalability, innovation, and solid leadership.
- Accept price fluctuations and focus on business growth metrics.
- Hold outstanding companies indefinitely to benefit from compounding gains.
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Lesson 4: Disciplined Selling, Only When Essentials Change
Fisher’s rule on selling is fiercely pragmatic: don’t sell for minor market shifts, sell only when fundamentals deteriorate. He cautions investors:
“The best time to sell a stock was ‘almost never’.”
His Texas Instruments story illustrates this: Fisher fought client pressure to sell after initial gains. Despite an 80% drop, TI eventually regained strength, validating his patience and conviction in his book “Common Stocks and Uncommon Profits”
Lesson 5: Focused Portfolio & Concentrated Bets
Fisher advocated for a small, concentrated portfolio, 10 or fewer carefully researched stocks, not indiscriminate diversification. He believed in deep, committed holdings in amazing businesses
Concentration reduces noise and allows thorough due diligence, a precursor to truly understanding a business’s long-term potential.
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Bonus Lesson: Qualitative Analysis & Investor Psychology
Throughout Common Stocks and Uncommon Profits, Fisher emphasises qualitative analysis of stocks, investor psychology, and corporate governance. His checklist inherently addresses these:
- Are leaders candid about setbacks?
- Does management think like owners, or merely executives?
- Is there a culture that fosters innovation and trust?
These behavioural and psychological metrics, the intangible fabric of company culture, are often predictors of future resilience.
FCA Disclaimer
This article is for educational purposes and does not constitute financial, investment, or regulatory advice. WealthilyYours and its contributors are not authorised by the Financial Conduct Authority. All investing involves risk, including the risk of loss. Past performance is not indicative of future results.
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Final Take: Common Stocks and Uncommon Profits
The expanded lessons from Common Stocks and Uncommon Profits provide more than just theory, they offer a practical road map for identifying extraordinary companies:
- Use the 15 point checklist to evaluate quality holistically.
- Apply scuttlebutt research for qualitative insights.
- Commit to growth investing and long-term compounding.
- Sell only when essential fundamentals break.
- Embrace concentrated portfolios with disciplined conviction.
- Measure intangible factors like governance and culture to predict sustainability.
Philip Fisher’s timeless wisdom blends quantitative checks with qualitative depth. When applied thoughtfully, the Common Stocks and Uncommon Profits methodology equips investors to make educated, confident, and patient decisions in pursuit of uncommon profits.
Let Fisher’s lessons shape your investment mindset, and guide you toward identifying and holding onto truly exceptional businesses for the long haul.
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