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Investing Master Class

Philip Fisher’s 15 Points to Look for in Common Stock

Fisher made his clients extraordinarily rich and is recognized by Morningstar as “one of the great investors of all time”.

Philip Arthur Fisher (September 8, 1907 – March 11, 2004) was an American stock investor best known as the author of Common Stocks and Uncommon Profits, a guide to investing that has remained in print ever since it was first published in 1958.

Fisher made his clients extraordinarily rich and is recognized by Morningstar as “one of the great investors of all time”. Despite this, he isn’t well known.

Although Fisher was known as a growth investor, top value investors like Warren Buffett were influenced by his work. Buffett has called Fisher’s book “Common Stocks and Uncommon Profits” a “very, very good book”.

Fisher’s methodology was to conduct extensive research on industries and companies. Below are 15 key considerations that he used to help frame his research.

15 Points to Look for in a Common Stock

  1. Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
  2. 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 largely been exploited?
  3. How effective are the company’s research and development efforts in relation to its size?
  4. Does the company have an above-average sales organization?
  5. Does the company have a worthwhile profit margin?
  6. What is the company doing to maintain or improve profit margins?
  7. Does the company have outstanding labor and personnel relations?
  8. Does the company have outstanding executive relations?
  9. Does the company have depth to its management?
  10. How good are the company’s cost analysis and accounting controls?
  11. 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 competition?
  12. Does the company have a short-range or long-range outlook in regard to profits?
  13. In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders’ benefit from this anticipated growth?
  14. Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur?
  15. Does the company have a management of unquestionable integrity?