Common shares extraordinary profits is one of the most influential books for investors who want to understand how to identify promising and profitable companies.
Written by Philip Fisher, one of the greatest investors of all time, the book reveals fundamental strategies for those seeking success in the stock market.
With a practical approach and based on decades of experience.
Fisher shares his analysis methodology, highlighting aspects that can transform an ordinary company into a source of extraordinary profits.
This article aims to explore the book's striking features, highlighting how these lessons can be applied to an investor's journey, from the beginner to the most experienced.
In the course of Common shares extraordinary profits, Fisher emphasizes the importance of investing in companies with strong fundamentals and a long-term growth outlook.
Contrary to what many believe, the key to success in stock investing is not just buying stocks at low prices.
One must deeply understand the company and its business.
The book suggests that the investor must be diligent in seeking information and, more than that, in interpreting this data.
Fisher argues that a good analysis goes beyond financial numbers – it involves understanding the business model, the sector of activity and the company's ability to innovate and adapt.
Special features
One of the central features of Common shares extraordinary profits is the focus on companies with sustainable growth potential.
Fisher suggests that, instead of looking for quick gains in short-term operations, investors should focus on companies that have a competitive advantage in the market.
This advantage can manifest itself in many ways, such as competent management, innovative products or a strong market presence.
When a company possesses these qualities, sustainable growth tends to occur naturally, and the investor, by holding their shares for long periods, benefits from consistent profits over time.
Another relevant point addressed in Common shares extraordinary profits is the concept of deep and detailed research.
Fisher explains that to identify companies with extraordinary profits, investors need to look beyond financial reports.
He proposes the use of the technique he himself called “scuttlebutt”.
This involves seeking information about the company directly from people who interact with it, such as customers, suppliers and former employees.
This approach allows the investor to gain valuable insights that are not available in traditional analysis, giving a clearer view of the company's true situation.
Innovation is also a recurring theme in the book.
Fisher believes that innovative companies have a superior ability to adapt to changes in the market, which gives them an important competitive advantage.
Common shares extraordinary profits suggests that investors should prioritize companies that are always seeking to improve their products and services.
A company that continually invests in research and development tends to maintain a prominent position in its sector, which is consequently reflected in its long-term financial results.
Long term vision
Furthermore, the book addresses the importance of long term vision however the investor must be patient.
Fisher stresses that investors must be patient and understand that significant returns do not happen overnight.
Rather, they are the result of careful analysis and patience in waiting for the company's growth potential to materialize.
Common shares extraordinary profits discourages the practice of trying to “predict” market behavior or short-term fluctuations.
Good companies
Instead, Fisher argues that the successful investor is one who invests in good companies and holds onto their shares, even during periods of volatility.
Another interesting aspect of Common shares extraordinary profits is the way Fisher presents the importance of good management in companies.
He states that, more than the numbers, what defines a company's success in the long term is the quality of its managers.
Companies with competent and visionary leaders tend to be more successful and are able to identify opportunities and navigate market difficulties more efficiently.
Fisher suggests that investors closely analyze the track record and management philosophy of the companies they are considering investing in, as this is a determining factor in the company's future success and is also fundamental in the selection process.
The famous dividends
Regarding the dividend distribution, the author has a balanced approach.
Although he recognizes the importance of dividends as a form of return for the investor, he emphasizes that the focus should not always be beyond companies that pay high dividends.
Common shares extraordinary profits argues that companies that reinvest their profits intelligently can generate even greater returns in the long run
These reinvestments should result in real growth for the company.
Because of this, Fisher encourages investors to observe how the company uses its profits and whether these reinvestments are being made effectively.
Diversification
Finally, the diversification strategy is also addressed in the book in a way that may surprise some investors.
Fisher believes that over-diversification can be detrimental, diluting an investor's potential gains.
In Common shares extraordinary profits, he argues that it is better to know a few companies in depth and invest in them with conviction.
Instead of spreading capital across dozens of companies without knowing the details of each one.
This does not mean that he is against diversification, but rather that it should be done carefully and strategically.
Always based on an in-depth analysis of the chosen companies.
Conclusion
In Common shares extraordinary profits, Philip Fisher offers a series of lessons that remain relevant for today's investors.
His lessons on the importance of deep analysis.
Focusing on the long term and looking for companies with sustainable growth are essential for any investor who wants to be successful in the stock market.
Through a rigorous and patient approach.
The small investor can apply these concepts in his own journey, focusing on good companies with strong growth potential.
By following Fisher's principles, the investor can, over time, reap the rewards of his dedication and patience, building a solid and profitable portfolio.
