Common Stocks And Uncommon Profits And Other Wr...
In the 2018 Berkshire Hathaway annual shareholders meeting, Warren Buffett called Fisher's "Common stocks and uncommon profits" a "very very good book". He further described how using Fisher's "scuttlebutt" technique continues to be a good way to investing, which is still used by Ted Weschler and Todd Combs at Berkshire Hathaway. John Train described Warren Buffett as 85% influenced by Benjamin Graham and 15% by Philip Fisher.
Common Stocks and Uncommon Profits and Other Wr...
Graham: The investor's chief problem -- and even his worst enemy -- is likely to be himself. This has proved the more true over recent decades as it has become more necessary for conservative investors to acquire common stocks and thus to expose themselves, willy nilly, to the excitement and the temptations of the stock market.
Livermore: It never was my thinking that made the big money for me. It always was my sitting. Got that? ... Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money.
Fisher: While losses should never cause strong self-disgust or emotional upset, neither should they be passed over lightly. They should always be reviewed with care so that a lesson is learned from each of them. If the particular elements which caused a misjudgment on a common stock purchase are thoroughly understood, it is unlikely that another poor purchase will be made through misjudging the same investment factors.
Philip Fisher is considered one of the pioneers in the field of financial analysis and has left his mark in the world of modern investment theory. According to Fisher, stocks need to be analyzed by their growth potential, and the book teaches the readers how to analyze businesses and their ability to grow its revenues and profits. Common Stocks and Uncommon Profits was published in 1958, and the lessons offered by Fishers are still applicable even after over half a century.
In the book, Common Stocks and Uncommon Profits, a checklist of fifteen points is provided on how to buy the best growth stocks. In general, the advice on buying growth stocks, as explained in the book, is based on a combination of quantitative and qualitative factors.
Paths to Wealth through Common Stocks expands on the brilliant solutions found in Fisher's highly regarded Common Stocks and Uncommon Profits, summarizing how worthwhile profits have been and will continue to occur through common stock ownership, and revealing why his method can increase profits while lowering risk.
I have four core stocks that are exactly the thing I want. They represent the bulk of my holdings. I have five others in much smaller dollar amounts that are potential candidates to enter this group. But I\u2019m not sure yet. If I were betting today, I\u2019d bet on two and not on the other three. Each decade up to this one\u2013there hasn\u2019t been time to work it out for the Eighties\u2013I have found a very small number of stocks, 14 in all, starting with 2 in the Thirties, that over a period of years made a profit for me of a minimum seven times the funds I put in and a maximum of many thousands of times my investment. Now I have gone into about three to four times as many additional securities in which I\u2019ve made more money than I\u2019ve lost. I\u2019ve had losses, in two cases as high as 50%. There also have been a number where I have made or lost 10%. That\u2019s almost the cost of being in business. But there are lots of cases where a stock has gone down moderately, and I\u2019ve bought more, and it\u2019s paid off for me enormously. These efforts were necessary to weed out the 14 where I have made the real gains. I\u2019ve held those 14 from a minimum of 8 or 9 years to a maximum of 30 years. I don\u2019t want to spend my time trying to earn a lot of little profits. I want very, very big profits that I\u2019m ready to wait for.
In the case of the five smaller ones, I don\u2019t want to. I will identify two of my four core stocks\u2013Motorola and Raychem. The third is a small-cap where there\u2019s been steady accumulation of shares by other long-range investors besides myself, so the floating supply of shares is abnormally small. A mention in FORBES would make the thing whoosh up. But until the earnings have started to materialize, it would whoosh down again. I don\u2019t want to cause that. Number four has an excellent record of making products allied to what it already has, but it\u2019s now doing one so big in relation to the present company that, if this shouldn\u2019t work as well, there could be risk in the shares. And the stock is already up. So again I\u2019ll pass.
As for Motorola, Wall Street is just beginning to see how good management really is. In the recent semiconductor depression, it was the only major company to earn subnormal but not insignificant profits. Of the others, one just about broke even and three went heavily into the red. That kind of stuff attracts Wall Street, but not the reasons behind it. Wall Street should pay greater attention, for instance, to whether a company has its production under statistical quality control\u2013shortening the production cycle, thereby reducing inventories and cutting costs. Motorola is also way above the average company in planning. One reason its semiconductor business has done so well in time of stress is that it picked the right areas to be in and didn\u2019t have the bulk of its effort in areas that ran into more trouble. Another reason it\u2019s so outstanding is due to the farsightedness and high moral standards of Bob Galvin, its chairman.
It is just appalling the nerve strain people put themselves under trying to buy something today and sell it tomorrow. It\u2019s a small-win proposition. If you are a truly long-range investor, of which I am practically a vanishing breed, the profits are so tremendously greater. One of my early clients made a remark that, while it is factually correct, is completely unrealistic when he said, \u201CNobody ever went broke taking a profit.\u2019 Well, it is true that you don\u2019t go broke taking a profit, but that assumes you will make a profit on everything you do. It doesn\u2019t allow for the mistakes you\u2019re bound to make in the investment business. Funny thing is, I know plenty of guys who consider themselves to be long-term investors but who are still perfectly happy to trade in and out and back into their favourite stocks.
The Grim Reaper has cut into my client list. I\u2019ve actually got only nine at the present time. I wondered as I turned 80 if some of my clients would begin to worry, well, should we leave our investments with a man whose life expectancy is obviously shorter than it was some years back? I was amazed to find the majority are not at all concerned. The reason is rather basic. The stocks I have put their funds in have certain common characteristics that I referred to earlier. If they\u2019re going to start going downhill, which many companies do sooner or later, that might be a minimum five years off. If I were to pass out of this world tomorrow, my people would have plenty of time before they\u2019d have to worry about these stocks and would still benefit from them as the present momentum carries on.
Some original business case thinking dates way back to investor Benjamin Graham in the 1930s. He wrote Security Analysis and the Intelligent Investor. He was considered the dean of financial analysis, as before him it did not really exist. He helped foster value investing. Near the same time Philip Fisher added a qualitative dimension to investing including the scuttlebutt investigation. He wrote Common Stocks and Uncommon Profits. While Graham was quantitative and Fisher added a qualitative view, both created novel business case ideas to test for investing. Warren Buffet relied on both to foster his investment approach. Interestingly Buffet cares about stocks with product differentiation but his approach also does not like the uncertainty of technology stocks, of which many have done well.
And yet, however just these sentiments will be allowed to be, we have already sufficient indications that it will happen in this as in all former cases of great national discussion. A torrent of angry and malignant passions will be let loose. To judge from the conduct of the opposite parties, we shall be led to conclude that they will mutually hope to evince the justness of their opinions, and to increase the number of their converts by the loudness of their declamations and the bitterness of their invectives. An enlightened zeal for the energy and efficiency of government will be stigmatized as the offspring of a temper fond of despotic power and hostile to the principles of liberty. An over-scrupulous jealousy of danger to the rights of the people, which is more commonly the fault of the head than of the heart, will be represented as mere pretense and artifice, the stale bait for popularity at the expense of the public good. It will be forgotten, on the one hand, that jealousy is the usual concomitant of love, and that the noble enthusiasm of liberty is apt to be infected with a spirit of narrow and illiberal distrust. On the other hand, it will be equally forgotten that the vigor of government is essential to the security of liberty; that, in the contemplation of a sound and well-informed judgment, their interest can never be separated; and that a dangerous ambition more often lurks behind the specious mask of zeal for the rights of the people than under the forbidden appearance of zeal for the firmness and efficiency of government. History will teach us that the former has been found a much more certain road to the introduction of despotism than the latter, and that of those men who have overturned the liberties of republics, the greatest number have begun their career by paying an obsequious court to the people; commencing demagogues, and ending tyrants.
Because when once an efficient national government is established, the best men in the country will not only consent to serve, but also will generally be appointed to manage it; for, although town or country, or other contracted influence, may place men in State assemblies, or senates, or courts of justice, or executive departments, yet more general and extensive reputation for talents and other qualifications will be necessary to recommend men to offices under the national government,--especially as it will have the widest field for choice, and never experience that want of proper persons which is not uncommon in some of the States. Hence, it will result that the administration, the political counsels, and the judicial decisions of the national government will be more wise, systematical, and judicious than those of individual States, and consequently more satisfactory with respect to other nations, as well as more SAFE with respect to us. 041b061a72