Philip A. Fisher's "Common Stocks and Uncommon Profits" presents a philosophy for profitable stock investing, detailing guidelines on what and when to buy, and when to sell. The book offers critical information on profit margins and dividends. It warns investors against common mistakes, including buying promotional companies, over-diversifying, following the crowd, and purchasing stock based solely on an annual report's tone. These investment principles, first published in 1958, are foundational to many popular investment philosophies today.
The book provides actionable advice for investors to identify potentially profitable common stocks. Readers learn specific reasons for selling, alongside insights into profit margins and dividend strategies. Fisher's famous "Top-Ten Don'ts" serve as concrete warnings against widely held but detrimental investment practices, guiding readers toward more discerning decision-making.
Key concepts
- Buying stock for the "tone" of its annual report — A warning against purchasing stock based on the subjective impression of an annual report rather than underlying financial substance.
- Over-stressing diversification — A caution against excessive diversification, suggesting it may dilute investment potential.
- Following the crowd — An admonition against making investment decisions based on popular opinion or herd mentality.
- Promotional companies — A category of companies to avoid, likely referring to those with aggressive marketing but questionable underlying value.
- Profit margins — A key financial metric discussed for its importance in stock selection.
- Dividends — A component of stock returns that Fisher provides critical information on.