This is by far the best Investment books if we list out top 10 in the order of ease of understanding, nuances in detailing and articulation of strong investment philosophies. I would recommend Common Stocks and Uncommon Profits book as the first book to read for someone who wants to start investing in markets.
Key Highlights of this book:
Scuttlebutt Method process in Investing:
Legendary investor Philip Fisher introduced investors to the concept of Scuttlebutt Investing through this book. Scuttlebutt meaning is rumor or gossips that typically derives from casual water cooler conversations. But Phil Fisher applies Scuttlebutt technique to enquire or analyze about a firm he is interested in by having conversations with company`s customers, employees, management, competitors. Fisher also provides in his book Common Stocks and Uncommon Profits a list of 15 different questions, some best asked and information obtained from external sources while others will be best asked to directly to company`s management. He had explained this process really in detail in his most famous classic “Common Stocks and Uncommon Profits”. This is Phil Fisher had deep influences in Warren Buffet`s investment philosophies. We can see in the below video Buffet referring to this book during the Berkshire Hathaway 2018 annual conference,
15 Points Checklist to Buy:
Fisher had published a ‘15 Points checklist’ to analyze before buying any company as investment. Below are the 15 questions which can be used even today before making any investments. This might not be sacrosanct but all 15 points should be part of a larger checklist one maintains.
- Does the company have products or services with sufficient market potential to make possible a sizeable increase in sales for at least several years?
- Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have been exploited?
- How effective are the company’s research and development efforts in relation to its size?
- Does the company have an above-average sales organization?
- Does the Company have a worthwhile profit margin?
- What is the company doing to maintain or improve profit margins?
- Does the company have outstanding labor and personnel relations?
- Does the company have outstanding executive relations?
- Does the company have depth to its management?
- How good are the company’s cost analysis and accounting controls?
- Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competitors?
- Does the company have a short-range or long-range outlook to profits?
- In the foreseeable future will the growth of the company require sufficient equity financing so that the large number of shares that are outstanding will largely cancel the existing stockholder’ benefit from this anticipated growth?
- Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles or disappointments occur?
- Does the company have a management of unquestionable integrity?
Best Message I took from the book other than above: The Appendix of this book has “Key factors in evaluating promising firms” which are classified into 3 parts: Functional factors that talk about the Firm`s functional characteristics, People factor that talks about really strong growth mindset management and finally Business factors that talks about the key business characters to look for. This definitely is a book any serious investor should start his investing journey with.