Common Stocks and Uncommon Profits and Other Writings by Philip Fisher

Last updated: Jul 28, 2023

Summary of Common Stocks and Uncommon Profits and Other Writings by Philip Fisher

1. The Importance of Scuttlebutt

One of the key takeaways from Philip Fisher's book is the concept of "scuttlebutt," which refers to the practice of gathering information about a company through various sources. Fisher emphasizes the importance of conducting thorough research and talking to people who have direct knowledge or experience with the company. By doing so, investors can gain valuable insights into the company's management, products, competition, and potential for growth.

Scuttlebutt allows investors to go beyond the numbers and financial statements and understand the qualitative aspects of a company. It helps in identifying potential investment opportunities and avoiding companies with underlying issues. Fisher suggests that investors should actively seek out information and not rely solely on public sources or analyst reports. By engaging in scuttlebutt, investors can make more informed decisions and increase their chances of finding uncommon profits.

2. Long-Term Investing

Fisher advocates for a long-term investment approach, focusing on companies with strong growth potential and durable competitive advantages. He believes that short-term market fluctuations should not deter investors from holding onto their investments. Instead, he encourages investors to have a long-term perspective and be patient.

According to Fisher, successful investing requires a deep understanding of the company's business model, industry dynamics, and competitive landscape. By investing in companies with long-term growth prospects, investors can benefit from compounding returns over time. Fisher advises against trying to time the market or chasing short-term gains, as it often leads to poor investment decisions.

3. The Scarcity of Truly Outstanding Companies

Fisher highlights the scarcity of truly outstanding companies that possess exceptional qualities and long-term growth potential. He argues that investors should focus on identifying these exceptional companies rather than settling for average or mediocre ones.

According to Fisher, outstanding companies are characterized by strong management teams, innovative products or services, sustainable competitive advantages, and a track record of consistent growth. These companies have the potential to generate above-average returns for investors over the long term.

Fisher advises investors to be patient and wait for opportunities to invest in outstanding companies, even if it means holding cash in the meantime. He believes that the potential rewards of investing in exceptional companies outweigh the risks and uncertainties.

4. The Importance of Management

Fisher emphasizes the critical role of management in the success of a company. He suggests that investors should thoroughly evaluate the management team before investing in a company.

According to Fisher, outstanding management teams possess qualities such as integrity, competence, and a long-term vision. They have a deep understanding of the company's industry, competitive landscape, and customer needs. They also prioritize shareholder interests and have a track record of making sound strategic decisions.

Fisher advises investors to assess the management team's past performance, communication style, and alignment of interests with shareholders. By investing in companies with exceptional management, investors can increase their chances of achieving uncommon profits.

5. The Importance of Competitive Advantage

Fisher emphasizes the significance of competitive advantage in determining a company's long-term success. He suggests that investors should focus on companies that have sustainable competitive advantages, which allow them to outperform their competitors over time.

According to Fisher, competitive advantages can arise from various factors such as proprietary technology, strong brand recognition, economies of scale, or a unique business model. These advantages create barriers to entry for competitors and enable the company to maintain pricing power and market share.

Fisher advises investors to evaluate a company's competitive position and assess the durability of its competitive advantages. By investing in companies with strong competitive moats, investors can benefit from long-term growth and profitability.

6. The Importance of Understanding the Industry

Fisher emphasizes the need for investors to have a deep understanding of the industry in which a company operates. He suggests that investors should analyze industry dynamics, trends, and competitive forces before making investment decisions.

According to Fisher, understanding the industry allows investors to identify companies with long-term growth potential and competitive advantages. It helps in assessing the company's positioning within the industry and its ability to navigate industry changes and disruptions.

Fisher advises investors to stay updated on industry news, attend conferences, and engage with industry experts to gain insights into the industry's future prospects. By understanding the industry, investors can make more informed investment decisions and identify opportunities for uncommon profits.

7. The Importance of Diversification

Fisher advocates for a diversified investment portfolio to mitigate risks and increase the chances of achieving uncommon profits. He suggests that investors should spread their investments across different companies and industries.

According to Fisher, diversification helps in reducing the impact of individual company or industry-specific risks. It allows investors to benefit from the growth of multiple companies and industries while minimizing the potential downside of any single investment.

Fisher advises investors to carefully select a diversified portfolio of outstanding companies with strong growth potential and competitive advantages. By diversifying their investments, investors can increase their chances of achieving above-average returns while managing risk.

8. The Importance of Patience and Discipline

Fisher emphasizes the importance of patience and discipline in successful investing. He suggests that investors should avoid impulsive decisions and stay focused on their long-term investment goals.

According to Fisher, successful investing requires discipline to stick to a well-defined investment strategy and not get swayed by short-term market fluctuations or noise. He advises investors to have a long-term perspective and not be influenced by market sentiment or speculative trends.

Fisher also highlights the importance of patience in waiting for the right investment opportunities. He suggests that investors should be willing to hold cash or wait for the market to present attractive investment options. By exercising patience and discipline, investors can increase their chances of achieving uncommon profits over the long term.

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