December 22, 2005 Quick Notes to book I read many years ago. "Common Stocks and Uncommon Profits." The author is Philip A. Fisher.
The 15 Points to Look For in a Common Stock (I have shortened many of these. I would suggest you read the full versions, as I certainly have posted these points quickly and very possibly incorrectly.)
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 further increase total sales and growth potentials, when the growth has already been exploited? I think what Fisher is suggesting in today's world, is to find management that is competent and aligned with the shareholder in growing the business. We see many companies today, where management is aligned with keeping their high paying jobs, with little true regard for their shareholders.
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?
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. Does the company have good cost analysis and accounting controls?
11. Can you determine how the company performs in relation to its competition?
12. Does the company look to the long-term?
13. Does the company require funding for future growth? Make sure you evaluate the funding used and account for that in your investment thesis. The funding might consist of debt or dilution.
14. Is management forthcoming when things are good and bad?
15. Does management have unquestionable integrity?
Selecting an advisor
"Before selecting an advisor, an investor should learn from that advisor the nature of his basic concept of financial management. He should then only accept an advisor with concepts fundamentally the same as the investor's own."
other interesting quotes and notes
"Always, however-sometimes within months, sometimes only after a much longer period of time-the bubble bursts. When a stock has been selling too high because of unrealistic situations, sooner or later a growing number of stockholders grow tired of waiting. Their selling soon more than exhausts the buying power of the small number of additional buyers who still have faith in the old appraisal. The stock then comes tumbling down."
"...I believe that the greatest long-range investment profits are never obtained by investing in marginal companies."
Last note, scuttlebutt, scuttlebutt, scuttlebutt. Listen to the pulse of the company. Feel the "grapevine". Vendors, competitors, investors and customers.