Common Stocks and Uncommon Profits and Other Writings (Wiley Investment Classic) (Paperback)

~ (Author) "You have some money in the bank..." (more)
Key Phrases: ten times earnings, common stock investment, outstanding investments, Food Machinery, World War, Texas Instruments (more...)

Editorial Reviews

Review

"...written by American Investment genius.... We are delighted to have the opportunity to reproduce an extract from this classic, recently reissued..." (Financial Director, November 2003)

"...these updated classics are packed with investment wisdom..." (What Investment, November 2003) --This text refers to an alternate Paperback edition.

Product Description

"You will find lots of jewels in these pages that may do as much for you as they have for me."—from the Introduction by Kenneth L. Fisher Forbes columnist

Widely respected and admired, Philip Fisher is among the most influential investors of all time. His investment philosophies, introduced almost forty years ago, are not only studied and applied by today's finance professionals, but are also regarded by many as gospel. He recorded these philosophies in Common Stocks and Uncommon Profits, a book considered invaluable reading when it was first published in 1958, and a must-read today.

Acclaim for Common Stocks and Uncommon Profits

"I sought out Phil Fisher after reading his Common Stocks and Uncommon Profits...When I met him, I was impressed by the man as by his ideas. A thorough understanding of the business, obtained by using Phil's techniques...enables one to make intelligent investment commitments."—Warren Buffett

"Little known to the public, rarely interviewed and accepting few clients, Philip Fisher is nevertheless read and studied by most thoughtful investment professionals . . . everyone will profit from pondering—as Warren Buffett has done—the investment principles Fisher espouses."—James W. Michaels Editor, Forbes

"My own copy [of Common Stocks and Uncommon Profits] has underlinings and marginal thoughts throughout."—John Train Author of Dance of the Money Bees

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Product Details

• Paperback: 271 pages
• Publisher: John Wiley & Sons; Later Printing edition (May 1996)
• Language: English
• ISBN-10: 047111927X
• ISBN-13: 978-0471119272
• Product Dimensions: 8.3 x 5.5 x 0.8 inches
• Shipping Weight: 14.4 ounces
• Average Customer Review: 4.4 out of 5 stars  See all reviews (60 customer reviews)
• Amazon.com Sales Rank: #105,594 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

150 of 155 people found the following review helpful:

5.0 out of 5 stars Easy to read book, some advice not practical, February 27, 2002

By	Peter Hupalo (MN United States) - See all my reviews (REAL NAME)

Common Stocks and Uncommon Profits is one of the classic investment texts written for the lay person.

Rather than just seeking value, Fisher realized that even a greatly "undervalued" company could prove a horrible investment. Sure, you might occasionally buy a stock for less than the company's cash-in-the-bank (back then, at least!). But what if the business is horribly run? It might not take long for the company to lose all that cash!

Even if the company returns to "fair" value, that ends the potential profit from investing in such a business. Holding an average company, because it was once undervalued, but is no more, makes little sense.

Fisher points out that the largest wealth via investing has been made in one of two ways. First, buying stocks when the markets crash and holding them until the markets recover. Secondly, with less risk and more potential return, you can also just invest in a small portfolio of companies which continue to strongly grow sales and earnings over the years. Then, if the company was correctly selected, you might never have to sell, while accruing a huge return on your initial investment.

Fisher pioneered the school of growth stock investing. In Common Stocks and Uncommon Profits, Fisher explains how he selects a growth company. He lists fifteen points which a company must have to be considered a superior investment.

Fisher's first point seems obvious: "Does the company have products or services with sufficient market potential to make possible a sizeable increase in sales for at least several years?"

Fisher shows that some companies might have potential substantial sales increases for only a few years, but after that have limited potential due to some factor, such as market saturation. For example, Fisher mentions the growth in sales of TV's until the U.S. market was saturated.

He also wisely suggests looking behind the products to seek other superior investments. While many TV manufacturers were competitive and it was difficult to tell which was best, Fisher points out that Corning Glass Works was, by far, the company most capable of producing the glass bulbs used in TVs.

Fisher tries to clearly distinguish between companies which are "fortunate and able" and those which are "fortunate because they are able." The second kind, the superior investments, are highly innovative and create new products which have growth potential. Fisher uses Dow Chemical as one example of a "fortunate because they are able" company.

The second point wants to know if management has the drive to innovate new products. A man ahead of his time, Fisher wonders about how much of a company's future sales might come from products not yet invented.

A constant theme of Common Stocks and Uncommon Profits is examining what the company is doing to prepare for the future. Is the company spending wisely on Research and Development? Or, is the company just trying to maximize its current profit and reinvesting nothing for future growth?

Fisher explains why answering that question is difficult in practice. What different companies account for under R&D is one problem. Another is that some companies are more successful than others at turning money spent on R&D into future marketable products. Today, we must assume this question is far more difficult to answer!

In addition to questioning a company's R&D, Fisher wants to see a company with a strong sales organization and distribution efficiency. "It is the making of a sale that is the most basic single activity of any business," he writes.

Yet, why don't investors focus upon such key factors instrumental to a company's future growth? Fisher points out that certain issues are not quantifiable. That is why many investors tend to focus upon financial issues which can be expressed in a simple ratio.

How does the investor go about answering the "unquantifiable"? How does the investor know how well-managed the company is? Or, how does one evaluate the people factors, which Fisher says are the real strength of a superior growth company?

Fisher suggests the "scuttlebutt" method. This involves talking to suppliers, customers, company employees, and people knowledgeable in the industry, and, eventually, company management. From this information, an investor can get a good feel for the quality of the company as a growth investment. Fisher teaches us how to learn to ask the correct, company-specific questions.

Fisher acknowledges the "scuttlebutt" method is a lot of work. But, he asks, should it be easy to find such great companies, when finding only a few can easily lay the foundation for building huge future wealth?

I tend to think the average individual investor will not use the "scuttlebutt" method. And, for most investors and most companies, even if the investor had the desire to use this method, it would not be practical.

Yet, for investors seeking to make investments in smaller, local companies, the "scuttlebutt" method might be of value. For angel investors or mini-venture capitalists, reading "Common Stocks and Uncommon Profits" is probably also worthwhile.

The book also has some excellent thoughts about buying-and-holding a stock and when to sell a stock. Fisher's thoughts on diversification are also well worth reading, although I would recommend more diversification than Fisher claims is adequate.

Overall, this is a great book for the individual investor. You will not be able to follow the "scuttlebutt" method in practice, for most investments, and, maybe, the complexity of today's companies and scientific research in many growth companies make Fisher's method less practical today than in the past, but there is much to learn about business and investing from this book.

Peter Hupalo, Author of "Becoming An Investor: Building Wealth By Investing In Stocks, Bonds, And Mutual Funds"

71 of 73 people found the following review helpful:

5.0 out of 5 stars solid principles stand over time, June 26, 1999

By A Customer

I've not heard of the name "Philip Fisher" in my entire school years (4 yrs Undergrad. b-school & 2 yrs MBA) even I've been majoring in Finance. The "fundamental" approach in investing, as opposed to looking at a "beta", has been so ignored by the academica as it's "not objective enough" or that it has no math involved. Indeed, the book is 95% art & 5% science, and there're no certain ways to pick up the technique. However, the book makes so much sense to me that I had to read it twice. The principles are sound and stand through the test of time. Most investing books disappear after a few years, and this one is still as good. Some of the techniques are hard to put into practice such as "getting to know the management" and "investigate the competitors", but this book lets you know that selecting an outstanding long term investment involves more homeworks than most people are willing to do nowaday. The tradeoff btw. "easy money" and risk always exists even in today's stockmarket most people don't know what kind of risk they're undertaking.

44 of 44 people found the following review helpful:

4.0 out of 5 stars Picking stocks by analysing businesses not accounts, May 5, 1997

By A Customer

When you have read Benjamin Graham analysing current ratios and balance sheets until you have decided that stock picking can be done by computer then (and only then) is it time to read Phillip Fisher. Phillip Fisher searches for "growth stocks", companies with superlative management (superior sales force, superior research and development, clear focus on the business) and he holds their stocks FOREVER. You can read this book and find not a single substantive mention of balance sheets, solvency, current ratios or any of the other things that most seasoned stock pickers rely on. Instead you find tips for analysing the scuttlebutt that you hear about a company and for testing whether management cuts the mustard. Thirteen or so of the "Fifteen Points" in the second chapter are worth the purchase price of the book and more. These points summarise as: * The management are technical geniuses. * The management know how to milk the existing business, and * The management resist the institutional imperative. Unlike Phillip Fisher however, I am not sure the management need to be technical geniuses. Indeed Phillip Fisher's notion of what constitutes a growth stock is quite narrow. He is almost obsessive about research and development. New products are to him the major determinant of growth. He would never have picked Coca-Cola or McDonalds as growth stocks because their product is not technically innovative. Yet a reader of Phillip Fisher may have picked these stocks. They pass the bulk of Fisher's fifteen points with flying colours. Just making hamburgers is not making Silicon chips. If you could combine Fisher's analysis with Graham and purchase these stocks at reasonable prices you might have even done well. (Incidently I am a Dow disbeliever from Australia and I still think McDonalds is reasonably priced.) Certainly Fisher would not allow you to hold McDonalds and Coke above a well run techno company. Fisher regards techno stocks with a sort of awe. And regards anybody that holds more than twenty stocks as financially incompetent. [I agree with him on the latter point, and hence hold a small number of non-techno companies, which kind of suits a technophope like me.] Fisher would have you purchasing Intel at $150, something which I am finding it increasingly difficult to justify (though I have been wrong on that stock before). Intel passes ALL of Fisher's fifteen points. Value does not play a part in Fisher's Analysis. He pays lip service once or twice, but there is precious little discussion on how to pick value. And that is where I think the book falls down. This is actually quite a limited failing. There are two ways to proceed with Fisher. One: Look for businesses that pass Phillip Fisher's tests. perhaps thirteen of the fifteen points is adequate. Then put through the second filter of "are they crazy on a Benjamin Graham analysis". This will make sure that you do not pay too much for a good business. Alternatively Benjamin Graham filter stocks. Get the listing down to say 200 or so that are not too expensive (particularly vis earnings rather than assets). Then put them through the Phillip Fisher filter. Buy the ones that pass best. This way you will not be tempted to buy a bad business just because its cheap. I tend to operate using the latter method. However I would never have found McDonalds that way. So maybe I should do a bit of both. Cheers and good hunting.