The author of this book is Philip Arthur Fisher. He was a legendary American investor whose career spanned over 60+ years. Warren Buffett praised Common Stocks and Uncommon Profits as a very very good book. The purpose of this book is to point out the best way to investing, which is reaping the greatest total profit for the least risk.
Layout of Common Stocks and Uncommon Profits and Other Writings
Common Stocks and Uncommon Profits and Other Writings has three parts with a preface, an introduction, and an appendix. The three parts are actually three different books written by the author.
Part One is Common Stocks and Uncommon Profits. There are 11 chapters and a preface in this part. It forms the main content of this book.
Part Two is Conservative Investors Sleep Well. It contains an epigraph, an introduction, and six chapters. This part discusses conservative stock investment and studies some investing mistakes.
Part Three is Developing an Investment Philosophy. It has four chapters and a conclusion. This part talks about the development of the author’s investment philosophy.
Highlights
The investment style of the author was growth-oriented. He used the scuttlebutt method to look for companies with extraordinary growth potential. This method employs 15 points. I will let you find out from the book.
The author opined that constant leadership in engineering, not patents, is the fundamental source of protection. So, we should look for companies which are always innovating or creating new products.
Buying a company without sufficient knowledge of it may be even more dangerous than having inadequate diversification. Thus, the author used the scuttlebutt method to get as much information about a company before making a decision. He said that diversification is important but we should own not the most, but the best.
The author remarked that it is not the profit margins of the past but those of the future that are important to the investor. It is definitely true but I might have paid too much attention to the past data.
The price of a stock is determined by the appraisal of the company, the industry it is in, and the general level of stock prices. Any significant move of a stock occurs because of a changed appraisal of that stock by the financial community. The value of a stock should not be considered based on its former price, but whether the company’s fundamentals are significantly more or less favourable than the current financial community appraisal of that stock
According to the author, the success in investment depends on the degree of skill and good fortune. This shows that he also acknowledged the role of luck in investment success.
He did not have a favourable view on bonds. He thought that bonds do not provide for sufficient gain to offset the probability of further depreciation in purchasing power.
Conclusion
I think Common Stocks and Uncommon Profits and Other Writings is a really good book and Warren Buffett’s praise is justified. It leads me to rethink some parts of my investment philosophy. For example, I tend to put more weight to the historical results than the future of a company. Going forward, I will pay more attention to the future of a company, instead of its past results.
I feel that this book should be read backwards as this would improve the readers’ understanding of the contents.
I will end this with some quotes from the book.
“Doing what everybody else is doing at the moment, and therefore what you have an almost irresistible urge to do, is often the wrong thing to do at all.”
“Be undeterred by fears or hopes based on conjectures, or conclusions based on surmises.”
“There are fads and styles in the stock market just as there are in women’s clothes.”
“Only by growing better can a company be sure of not growing worse.”
“All the correct reasoning in the world is of no benefit in stock investment unless it is turned into specific action.”
Recommended book
If you are interested in Common Stocks and Uncommon Profits and Other Writings, you may get the book through one of the links below*.
Get the book here from Kinokuniya Malaysia
Get the ebook here from Rakuten Kobo
*Disclosure: The links are affiliate links. If you buy the book using one of the links, I might get a small commission from your purchase.
