Common Stocks and Uncommon Profits

The book "Common Stocks and Unusual Profits" by Philip Fisher can be of interest if you're looking for guidance on how to invest in the stock market and identify businesses with the potential for long-term exponential growth. In the subject of value investing, this book is regarded as a classic and has influenced many well-known investors, including Warren Buffett.

The book is divided into three sections: the first section outlines the qualities to look for in a company before investing in it; the second section covers the best times to buy and sell stocks; and the third section discusses additional facets of investing, such as diversification, portfolio management, and investor psychology.

Part 1: What to look for in a company

Fisher argues that the most important factor in finding great companies is their potential for long-term growth. He suggests that investors should ask 15 questions about a company before buying its stock. These questions cover topics such as:

• The market size and demand for the company's products or services
• The quality and innovation of the company's research and development efforts
• The skill and integrity of the company's management team
• The company's competitive advantage and profitability
• The company's financial strength and capital allocation
• The company's corporate culture and employee relations

Fisher emphasizes that investors should conduct their own research by speaking with clients, suppliers, competitors, employees, and other sources of information rather than relying solely on financial statements or stock prices. He refers to this as the "scuttlebutt" method, which can produce insightful information that is not generally known.

Part 2: When to buy and sell stocks

According to Fisher, investors should purchase inexpensive stocks and hold them for as long as they continue to increase in value. He cautions against attempting to time the market or pursue quick riches. Unless there is a fundamental shift in the company's outlook or a better opportunity presents itself, he also cautions against selling equities too fast.

Fisher explains that there are three types of situations that can cause a stock price to drop:

• A general market decline
• A temporary setback for the company
• A permanent deterioration of the company's fundamentals

He suggests that investors should take advantage of the first two situations by buying more shares at a lower price, but avoid the third situation by selling their shares before they lose more value.

Part 3: Other aspects of investing

In the last part of the book, Fisher covers some other topics that are relevant to investing, such as:

• How to diversify your portfolio across different industries and sectors
• How to manage your portfolio by reviewing your holdings periodically and making adjustments as needed
• How to avoid common mistakes and pitfalls that can hurt your returns
• How to develop a rational and disciplined mindset that can cope with market fluctuations and emotions

Fisher emphasizes in his conclusion that investing is an art that requires judgment, intuition, and experience rather than being a mechanical or statistical procedure. He advises investors to take note of other investors who have made exceptional returns in addition to their own successes and disappointments.

If you are interested in learning more, I recommend you purchase the book through the link below, read the book yourself, and apply its principles to your own investing decisions.