Common Stocks, Uncommon Profits – 15 point to measure your business

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I just finished reading Philip Fisher’s seminal investment book ‘Common Stocks, Uncommon Profits’. The book tells you how to truly evaluate a company that you want to invest in (or buy stock of).

The book is a little dated, first coming out in 1960. Some things certainly don’t apply to today’s world (I don’t think you or I could go and meet anyone in management of any listed company!), but a lot of the points are valid and can (and should) be done.

With books like this I like to turn them on their head and say “is my company worth investing in” or how to make it so.

Luckily, Fisher was kind enough to list the 15 criteria that a company should satisfy (or as many as possible). This is a perfect tool for measuring my business and I hope you’ll use it for your company too. Making ourselves and our companies outstanding and outstanding investment opportunities is a key goal!

Here’s his list

  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 still 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? (ouch!)
  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 stockholders’ benefit from this anticipated growth?
  14. Does 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?

How well did your company do? I can clearly see some areas where my company needs to improve.

The book is an amazing read. Pick it up if you can. I’m not going to include a link to it, I’m sure you know where to find it!

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