In addition to providing guidelines for what to purchase, Fisher addresses issues such as when to sell and provides a number of important pointers related to common mistakes, including excessive diversification, buying into promotional companies (think of the dot com bubble), using superficial criteria such as the “tone” of an annual report, and more. Many of these points are very “forward looking” in nature and intended to measure the kind of growth an investor can project based on qualitative factors. However, the majority of the items in his list are more qualitative and focus on such factors as whether management has the right people in research and development, the quality of the sales organization, and overall management depth and integrity. Many of these are in fact quantitative in nature, such as an examination of whether a business has a worthwhile profit margin. Checklists For Better Decision Makingįisher devotes the bulk of his book to convenient checklists that investors can use to analyze a business. However, Fisher’s main point is still valid in terms of looking beyond the numbers to gain a better understanding of the nature of a business. In recent years, speaking to company management has grown more difficult with the implementation of “Regulation Fair Disclosure” and other measures intended to promote simultaneous disclosure of all relevant facts. By speaking to the management of a prospective investment as well as competitors, suppliers, and customers, one can often assemble a view of the business that a pure quantitative analysis could not reveal. Essentially, scuttlebutt involves seeking out information about a business from both published sources as well as through the “business grapevine”. While Graham’s advice for the enterprising investor relied on securing interests in companies with well established track records generally at low valuations, Fisher was much more open about the concept of seeking out truly outstanding businesses and being willing to pay higher valuations in exchange for the prospect of much higher returns.įisher also believed in what he referred to as “scuttlebutt”. Yet there were substantial differences in approach. Both men had experienced the years of the Great Depression and proposed detailed systems for investors to capture the substantial returns offered by well chosen stocks while avoiding the pitfalls that can result in permanent loss of capital. Common Stocks and Uncommon Profits was published in 1958, about a decade after Graham published The Intelligent Investor.
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