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- On May 10, 2017
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- Futures Index Trading, IndexTrader Advanced, learn to trade, Philip Fisher, Stock Market, Trading Mentors, Trading Systems
Do you want to learn how to invest – the Philip Fisher way? Fisher developed a series of question to ask before buying a stock:
- Does the company have the products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
- Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?
- How effective are the company’s research and development efforts in relation to its size?
- Does the company have an above average sales organization?
- Does the company have a worthwhile profit margin?
- What is the company doing to maintain or improve profit margins?
- Does the company have outstanding labor and personnel relations?
- Does the company have outstanding executive relations?
- Does the company have depth to its management?
- How good are the company’s cost analysis and accounting controls?
- 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?
- Does the company have a short range or long range outlook in regards to profits?
- 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 stockholders’ benefit from this anticipated growth?
- Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur?
- Does the company have a management of unquestionable integrity?
In 70 years of money management, Fisher maintained a stellar record based on his belief in the strength of well-managed, high-quality growth stocks and his commitment to long-term investing. One of Fisher’s most famous investments was Motorola: he bought the stock in 1955 and didn’t sell it for the remainder of his life.
Fisher maintained a famous list of “fifteen points to look for in a common stock,” divided among two categories: qualities of management and characteristics of the business itself. Fisher recommended looking for management with integrity, conservative accounting, accessibility, and good long-term outlook, as well as openness to change, excellent financial controls, and good personnel policies.
Fisher recommended targeting business for investment that had growth orientation, high profit margins, high return on capital, a commitment to research and development, superior sales organization, leading industry position and proprietary products or services.
Fisher was famous for the depth of his research on companies with which he would invest. He relied on personal connections (what he called the “business grapevine”) and conversation to learn about businesses before buying stock. His first and most important book, “Common Stocks and Uncommon Profits” of 1958, devotes careful attention to this concept of networking and gathering information via business contacts.