Saturday, July 16, 2011

Philip A. Fisher’s "Ten Don'ts" For Investors

In his book, Common Stocks and Uncommon Profits, Philip Fisher also stated "Ten Don'ts" for investors.

  1. Don’t buy into promotional companies
  2. Don’t ignore a good stock just because it is traded “over the counter”
  3. Don’t buy a stock just because you like the “tone” of its annual report
  4. Don’t assume that the high price at which a stock may be selling in relation to earnings (PER) is necessarily an indication that further growth in those earnings has largely been already discounted in the price.
  5. Don’t quibble over eights and quarters, i.e. few sens.
  6. Don’t overstress diversification
  7. Don’t be afraid of buying on a war scare
  8. Don’t be influenced by what doesn’t matter, that statistic of former years’ earnings and particularly of per-share price ranges of these former years quite frequently “have nothing to do with the case”.
  9. Don’t fail to consider time as well as price in buying a true growth stock. Based on time, rather than price, eg. a month before the commission of new plant, etc.
  10. Don’t follow the crowd, ie. collective perception on the broad picture or particular industry, trend, outlook, favor of the months, etc. These investment fads and misinterpretation of facts may run for several months or several years. Given the same facts, change of such perceptions would lead to different conclusion.

Summary of Common Stocks and Uncommon Profits
by Philip A. Fisher
  1. What to buy? Stocks selection criteria
  2. When to buy, when to sell and when NOT to sell?
  3. Ten Don'ts for investors
  4. Further explanations: Dividend
  5. How to find growth stocks?