This book is a must read for all investors. Die die must read this book.
Philip Arthur Fisher (1907 – March 11, 2004) is 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. Perhaps the most well-known of Fisher's followers is Warren Buffett.
Fisher suggested using 15 questions to evaluate a company:
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 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 stockholder's 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?
According to Phil Fisher these questions should be posed to suppliers, competitors, and consumers.
Five Don'ts for Investors
1. Don't buy into promotional companies.
2. Don't ignore a good stock just because it is traded "over-the-counter."
3. Don't buy a stock just because you like the "tone" of its annual report.
4. Don't assume that the high price at which a stock may be selling in relation to its earnings is necessarily an indication that further growth in those earnings has largely been already discounted in the price.
5. Don't quibble over eighths and quarters.
Fisher's most famous investment was his purchase of Motorola, a company he bought in 1955 when it was a radio manufacturer and held until his death in March, 2004 at the age of 96.
Next Book Review - Common Stocks and Uncommon Profits.
Book Review - How to Make Money in Stocks By William J.O'Neil
This is a wonderful book to start investing with and I am fortunate to read it. Below is a summary of the CANSLIM criteria.
CANSLIM
1. C = Current Quarterly Earnings Per Share
- Earnings must be at least 18-20%
2. A - Annual Earnings Per Share
- These figures should show meaningful growth for the last 5 years.
3.N = New Things
- Buy companies with new products, new management , or significant new changes in the industry conditions. Most importantly, buy stocks when they start to hit new highs prices. Forget chearp stocks they are there for a reason.
4. S = Shares Outstanding
- This should be a small and reasonable number. CANSLIM investors are not looking for older companies with large capitalization.
5.L = Leaders
- Buy market leaders, avoid laggards.
6. I = Institutional Sponsorship
- Buy stocks with at least a few institutional sponsors who have better than average recent performance record.
7.M = General Market
- The market will determine whether you win or lose so learn how to discern the market's overall direction, and interpret the general market indexes ( price and volume changes and action of the individual market leaders.