Common Stocks and Uncommon Profits

Fisher argues for buying a small number of outstanding growth companies and holding them for very long periods, which was a direct alternative to the statistical bargain-hunting that dominated when he published in 1958. He was a working investment counsellor in San Francisco from 1931, and the method comes from his own practice.

The operational core is the scuttlebutt method. Fisher argues that the information needed to assess a company comes from talking to its customers, suppliers, competitors, former employees and trade association people, and that the picture assembled this way is more reliable than what appears in financial statements. He gives fifteen points to look for in a company, covering the market for its products, the research effort, the sales organisation, profit margins, labour and executive relations, depth of management, accounting controls, the long-range outlook on profits, future equity dilution, and the honesty of management with shareholders when things go wrong.

He also gives three reasons to sell, which are that the original purchase was a mistake, that the company no longer meets the fifteen points, or that a clearly better opportunity exists. He rejects selling because a stock has risen, because the market looks high, or because of expected recessions. His view on dividends is that a company able to reinvest at high returns should retain earnings.

The book is short and repetitive in places, and the examples are anonymised, which weakens them. Scuttlebutt is harder now under disclosure regulations that restrict what company insiders can tell an investor. The fifteen points remain the best published checklist for qualitative business assessment, and Buffett has said his approach is part Graham and part Fisher.

Founder, Fisher & Company, 1931-1999

Common Stocks and Uncommon Profits defined qualitative growth investing and the scuttlebutt method, and Buffett credits him as one of his two intellectual sources.

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