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Common Stock & Uncommon Profit : An Indian perspective
A thread ⬇️ wealthsutra.wordpress.com

wealthsutra.wordpress.com

Philip Fisher had been arguably the second largest influence on #warrenbuffett ! So let us dig deeper into his core philosophies detailed in his magnum opus - "Common Stock Uncommon Profit".

He gives a great investing framework looking at a business of any company and arguably called as earliest #venturecapitalists in USA. Check out the video for elaboration with Indian examples such as Action Construction Equipment , Advanced Enzymes & Balaji Amines !

youtu.be

- Expanding Market

Does the company have significant sales growth potential for next several years? You should look at management quality, industry trends and business cycles.

Fisher said "One should focus on the quality of growth by looking at several years of growth, and not make year-on-year comparisons." Tesla is a stock which qualifies as the ideal example with #ElectricVehicles as a futuristic growth market .

2. Product Development: Balaji Amines
Does the management have the determination to continue development of products and processes to increase total sales when the existing growth potential has been exhausted?
Saregama & Balaji Amines are good examples on this parameter!

Personally , it resulted for me a bigger winner than its close competitor #AlkylAmines ! While Alkyl Amines had given me a near 2.5X return over past years Balaji Amine has been a 5 bagger in just one year !

3. Efficient Research and Development: Advanced Enzymes
Is the company’s research and development efforts effective relative to its size? Checkout Advanced Enzymes on R&D expense as a percentage of Sales below:

You may watch the complete analysis on this stock here youtu.be

4.Above Average Sales organization: Action Construction Equipment (ACE)

Does the company have an above average sales team? Fisher says: "The ability to make repeat sales to satisfied customers is the first benchmark of success."

In my portfolio I have a market leader in mobile crane market namely ACE which qualifies this because of the following 2 facts:

A detailed analysis of Action Construction Equipment is done here: youtu.be

5.Handsome Profit Margin
Does the company have an attractive profit margin? Look for best margins in their industry.Period.
6.Initiatives to Improve Margins

What is the company undertaking to protect or grow profit margins? Companies that actively review their operations for improvement and growth opportunities are likely to boost their profit margins in the long run.

Be wary of companies whose profit margins rise only as a result of simple price increase, which is not necessarily an attractive indication to a long-term investor.
7.Relations with Employees

Does the company have outstanding labour and personnel relations?

Happy employees tend to be more productive.Companies with good labour relations usually are the ones making every effort to settle grievances quickly… Investors who buy into a situation in which a significant part of earnings comes from paying below standard wages for the area…

…involved may in time have serious trouble on his hands. You should also check with employee's opinion on Glassdoor.com!
I will cover rest 8 points in next blog !

Glassdoor.com

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