![]() ![]() What is the company doing to maintain profit margins? Phil highlights that the greatest long term investment opportunities are made in companies with a sustainable profit margin. However, thousands of investors may be unable to answer this simple question. There would not be a small business owner on the planet who doesn’t understand this concept. Some companies enjoy large and sustainable profit margins, others scrape by on wafer thin margins. Phil instructs us to question how many cents flows through to the bottom line from each $1 of sales. The enterprising investor may have noticed the opportunity to export these supplements too, providing another lever of sales growth over time. Phil believes this to be an important characteristic of successful investing.ĭoes the company have a worthwhile profit margin? This unlocked another opportunity helping sales expand. The categories were varied and included Women’s health and Children’s health. At the time, they were expanding their line of health supplements by introducing several new categories. In 2008, Blackmores was the leading health supplements business in Australia. Consider Blackmores to illustrate this point. Preferably, these sales will fall in the company’s core competence. Obviously, it makes perfect sense to invest in businesses that can grow their sales over time. For the sake of brevity, I will focus on the characteristics that resonated with me.ĭoes the company have products or services with sufficient market potential to make possible a sizeable increase in sales for at least several years? I have chosen not to detail each of the fifteen characteristics he looks for, however, if you are interested, I recommend reading the book in its entirety. He approaches investments in the same way insurance companies approach risk, identifying key qualities. Phil sets out a 15-point plan allowing the average investor to identify companies that can increase several hundred percent. This information is critical to understanding a business in detail and is widely used by professional investors. Using mosaic theory, a detailed assessment of the company is revealed. Generally, these contacts are prepared to tell you a lot more if they know they will not be quoted in the media. Competitors’ may be able to identify changes to the industry structure before it happens. For example, employees may be able to identify key products or services before they are commercialised. Phil notes the amazing picture one can build by speaking with these contacts. Scuttlebutt involves speaking with employees, competitors, management, and trade association executives etc. Scuttlebutt is the process by which information about a company is unearthed. Phil Fisher is no different and he begins his analysis with a technique he calls “scuttlebutt”. If you have read the first two book reviews, you may notice a common pattern emerging. ![]() However, Phil Fisher’s investments, enjoy an increase in their intrinsic value overtime as the company develops new product lines and enters new markets. Ben Graham’s investments tend to benefit from a one-time profit. The primary difference between the two philosophies is clear. If Ben Graham is the father of value investing, Phil Fisher is the father of growth investing. Warren Buffett once described himself as being 85% Ben Graham and 15% Phil Fisher. ![]()
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