Summary

Philip Fisher’s book outlines how to analyze stocks, understand the market, and profit from smart investments by being patient with the stock market and keeping your money in for the long-term. Perform comprehensive analyses and be incredibly picky - for example picking one from every 250.

Key Takeaways

• Institutional investors are at least as meticulous as this. Be wary testing the waters for yourself
• Scuttlebutt method: talk to 5 members in industry for complete picture, uncommon insight

Notes

15 points for max shareholders returns

1. Product / service suitable for marked increase in sales over several years
2. Management that develops new related products with sales demand
3. R&D effectiveness relative to size
4. Above average sales org
5. Worthwhile profit margin
6. Efforts to maintain / improve margins
7. Great customer + personnel relations
8. Great executive relations
9. Management depth
10. Cost analysis, accounting controls
11. Other aspects of business relating to industry to compare to competitors
12. Short / long range approach to profits
13. Additional fundraising requirements
14. Transparency during faltering sales
15. Unquestionable integrity

• Business characteristics v quant evaluation
• Growth stock vs value stock
• Invest in correct phase of R&D cycle
• Don’t invest all of your money at once (in case of downturn, want buying power)

5 powerful market forces

1. Current phase of business cycle
2. Trend of interest rates
3. Gov’t attitude towards stocks, enterprise
4. Long range trend for inflation
5. New inventions affecting old industries

3 reasons to sell stock

1. Mistake made in original investment
2. Stock becomes unqualified over time
3. Moving funds to even better stock

• Don’t sell b/c “already caught upswing”, best companies continue to outperform
• Dividends give profits back to shareholders
• Not issuing dividends can signal company retention for future growth / increase value

5 don’ts for investors

1. Don’t buy into promotional companies
2. Don’t ignore b/c over-the-counter stock
3. Don’t buy just b/c of annual report’s tone
4. Don’t assume high capitalization / earnings ratio (P/E?) means no future growth
5. Don’t quibble over small price changes

5 more don’ts for investors

1. Don’t over stress diversification (< 25)
2. Don’t be afraid of buying on a war scare
3. Don’t be influenced by what doesn’t matter
4. Don’t fail to consider both time and price
5. Don’t follow the crowd

Finding growth stocks

• Initial screening
• Talk to bankers, customers, suppliers etc
  • Scuttlebutt method
• Talk to management (with info from ↑)
• Potential pipeline
  • considered for investigation: 250
  • screened / looked at: 40 - 50
  • visited: 2 - 2.5
  • invested: 1