Common Stocks and Uncommon Profits by Philip A. Fisher was accepted as gospel when it was first published in 1958, and it remains incredibly influential today…
Common Stocks and Uncommon Profits caught my attention when I saw it mentioned on an Amazon Review of The Intelligent Investor.
And here’s the interesting part:
The commenter said that while Ben Graham was responsible for 85% of Warren Buffett’s stock-picking approach, Phil Fisher’s Common Stocks and Uncommon Profits was what guides the other 15%.
Pretty cool, right?
So is Common Stocks and Uncommon Profits really a Warren Buffet-worthy book? Well, since I just finished reading this book I feel qualified to tell you, the answer is… yes! Common Stocks and Uncommon Profits is a terrific investing book and in this book review I will tell you why.
Why Read Common Stocks and Uncommon Profits?
Common Stocks and Uncommon Profits is very different from a lot of the investing books I read. The book is focused on soon-to-explode growth stocks, and the approach is quite a bit different from anything I’ve seen. Here’s what I mean…
A lot of finance books deal with hard facts, like balance sheets and P/E ratios, Common Stocks and Uncommon Profits looks at a much more qualitative set of investment criteria. Fisher doesn’t worry too much about traditional fundamental valuation metrics. Instead, he wants to find out for himself if the company is actually good or not.
And I’ll admit: It sounds simple at first. But once you start to dig into Common Stocks and Uncommon Profits you quickly discover a fascinating framework you can use to figure out if company’s have what it takes for years and years of earnings growth. Yup…
So here’s the best part:
The Best Part About Common Stocks and Uncommon Profits:
The best part about Common Stocks and Uncommon Profits are the first two chapters. The book wastes no time in cutting to the chase. The first chapter is about “Scuttlebutt” which is Fisher’s method for researching a company’s operations, sales prospects and management. the Scuttlebutt chapter is only 3 pages. But it’s incredibly valuable and sets the tone for the rest of the book.
Because the wisdom doesn’t stop there: Chapter 2 of Common Stocks and Uncommon Profits is made up of 15 questions that you should ask every company you’re evaluating for investment. It’s very actionable and you can start using this information immediately. You’ll be surprised at how much information is covered by the 15 questions. And you’ll almost automatically be a better investment analyst. To be honest…
Fisher even sounds like he surprised himself with the accuracy of analysis he could conduct, just by calling a few customers, suppliers and vendors to see how they were influenced by management’s prospects. You will find the approach to security analysis outlined in Common Stocks and Uncommon Profits is surprisingly refreshing.
But it’s not like Fisher’s knowledge just dries up after the first two chapters…
Common Stocks and Uncommon Profits continues to deliver incredibly valuable information throughout. The middle section of the book goes into more detail on the most important of the 15 questions. It also addresses a lot of questions you might have, like, “When do I buy and sell growth stocks?”
The last part of Common Stocks and Uncommon Profits is also very interesting because it’s focused on Fisher’s life. It’s like a mini-biography starting at the outset of Fisher’s career and explains how he came to manage such a large and successful firm.
I always find stock investor biographies to be fascinating. And discovering how Fisher learned his own stock picking theory helped me better understand his lessons.
I just have one word of warning.
One Thing You Should Know About Common Stocks and Uncommon Profits…
If you’re going to buy Common Stocks and Uncommon Profits to try and find stock ideas, there’s something you should know. Buying a book for the wrong reason sucks, so let me make this clear for you:
While this book provides all the questions you need to figure out if a company is positioned for decades of growth, you’ll have to actually do the work yourself. Fisher’s method is based on getting out there and seeing for yourself. He’s interested in asking the hard questions, and watching how management behaves when things are tough.
So while the lessons outlined in Common Stocks and Uncommon Profits are not as fast as pulling up financial statements. Fisher’s “Scuttlebutt” doesn’t require a PhD. It’s pretty straightforward. And you know you’re getting public information that most of the public doesn’t really know about. So should you buy Common Stocks and Uncommon Profits?
Common Stocks and Uncommon Profits – The Final Word?
Common Stocks and Uncommon Profits is a fantastic read that is different from a lot of the financial books you’ll find being published today. I found Fisher’s writing to be surprisingly refreshing. His approach is something that’s easy to forget in this day and age of technical analysis and high frequency trading, so I think it’s worth learning.
And hey, if it’s good enough for Warren Buffett it’s definitely of interest to me. That’s why I recommend you buy Common Stocks and Uncommon Profits on Amazon today.
Common Stocks and Uncommon Profits Details and Video Book Review
Author: Philip A. Fisher
Publisher: Wiley Investment Classics