COMMON STOCKS AND UNCOMMON PROFITS SUMMARY (BY PHILIP FISHER)
Updated: November 19, 2024
Summary
In the video, the speaker discusses Philip Fisher's 15-point checklist for choosing great investments, which emphasizes factors like market expansion and efficient R&D. Fisher introduces the Scuttlebutt method to gather information from diverse sources like suppliers and customers. He challenges the conventional wisdom on dividends and diversification, instead urging investors to focus on companies they thoroughly understand and to utilize excess capital wisely. Fisher also recommends a screening process to quickly identify promising investment opportunities through industry consultations and Scuttlebutt research.
Fisher's 15 Points Checklist
The core of any investment process is deciding which companies to invest in. Fisher created a checklist of 15 points that companies must meet to be considered great investments, including addressing expanding markets, efficient research and development, and maintaining profit margins.
The Scuttlebutt Method
After reviewing Fisher's 15 points, the Scuttlebutt method is suggested to gather information from various sources like suppliers, customers, and former employees to make informed investment decisions.
Unconventional Wisdom 1: Dividends Don't Matter
Fisher challenges the overconfidence in dividends, emphasizing that dividends are not crucial for investment decisions. He explains how companies can utilize excess capital for better purposes than paying out dividends.
Unconventional Wisdom 2: You Are Diversifying Too Much
Fisher questions the common belief in over-diversification, highlighting the importance of focusing on companies that investors thoroughly understand rather than spreading investments too thin across multiple unknown entities.
Fish in the Right Pond
To save time and focus on potential winners, Fisher suggests a screening process to quickly identify promising investment opportunities. This involves initial discussions with industry insiders, narrowing down a list of companies, conducting Scuttlebutt research, and visiting the management of selected businesses.
FAQ
Q: What are some key criteria Fisher highlighted for companies to be considered great investments?
A: Fisher created a checklist of 15 points, including addressing expanding markets, efficient research and development, and maintaining profit margins.
Q: What is the Scuttlebutt method suggested for making informed investment decisions?
A: The Scuttlebutt method involves gathering information from various sources like suppliers, customers, and former employees.
Q: How does Fisher challenge the common belief in dividends for investment decisions?
A: Fisher emphasizes that dividends are not crucial for investment decisions and explains how companies can utilize excess capital for better purposes.
Q: What is Fisher's perspective on over-diversification?
A: Fisher questions the common belief in over-diversification and highlights the importance of focusing on companies that investors thoroughly understand rather than spreading investments too thin.
Q: What does Fisher suggest to quickly identify promising investment opportunities?
A: Fisher suggests a screening process involving initial discussions with industry insiders, narrowing down a list of companies, conducting Scuttlebutt research, and visiting the management of selected businesses.
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