Let’s just here for 10 seconds, the words of the world’s greatest investor, Warren Buffet, I was very influenced by feel fresher.
00:08 - When I first read is two bucks back around 1960 or thereabouts and I think that they’re terrific books.
00:14 - I think Phil has a terrific guy to myself as being a sort of a hundred percent, Ben Graham and a hundred percent Phil fish.
00:19 - One of the best books on investment was written, think it 1958.
00:25 - I think I read it around 1960 by Phil Fisher called Common Stocks and Amin province in stock market, there are two ways to make money one is to time the market, that is buying when the markets are low and selling when the markets are expensive, which is psychologically very difficult.
00:44 - And this involves investing huge sums of money during highest pessimism and uncertainty.
00:49 - And then selling at the time of high optimism, the other way is to find outstanding companies and hold them forever.
00:57 - Mr. Phil Fisher was known for the latter, He was an advocate of buying businesses, which have very long term prospects and actually never selling them mr.
01:06 - Phil Fisher started as investing career in 1928 just before the Great Depression of 1929 when America’s market lost more than 90% of its value.
01:18 - And over the years developed his style of investing in the great businesses and actually holding them for a very long time as he grew in his investing career and developed confidence on very You businesses, he added money to them and sold the businesses, which he thought were we, you will be surprised to know that the number of companies in his portfolio.
01:39 - As his fund group reduced to just six, one of which was Motorola, which he held onto until his death, and it has his this philosophy, which made Warren Buffet.
01:50 - Say, the best time to sell a good business is never if Warren Buffet, as he said makes investing on the principles of Phil Fisher.
01:59 - Let’s see. They are and how these can help us to make uncommon profits on our investments.
02:06 - This is the better investor helping, you achieve your financial goals and freedom.
02:11 - Through organizing your finance, stock market, investing and learning from billionaires.
02:16 - And these are top five lessons from the book, Common Stocks and uncommon profits written by Phil vischer lesson.
02:25 - Number one, what to buy a business has attracted your attention.
02:29 - For whatever reason, how would you come on to a conclusion that it is worthy of investment of your hard-earned money? Phil vischer lays out of 15 Point checklist to look for when you’re looking for a potential investment these are one how big is the potential? The very first thing you must know is what are the products that the company sells in order to make money? You just cannot invest in a company just because your friend told you about it or just because you looked at the price of it, once you What is the product of the business? You must evaluate that? How huge is the potential for growth for that product which can lead to sizable increase in sales for many years to come, for example, jockey unlike the west where Calvin clean is? The underwear that every human desires.
03:17 - There actually was not a single brand like that in Asia, not only that the underwears lacks style and quality a company called jockey notice this and they started branding, and gaining customers.
03:29 - MERS in Asia, much like Calvin clean invest.
03:33 - They have been increasing their sales by almost 20% for last 15 years.
03:38 - And even today, the growth engine is still running at the same Pace underwear.
03:43 - Have a short replacement cycle and one that cannot be disrupted by technology.
03:49 - Irrespective of how the economy is performing, or what is happening to inflation.
03:54 - One won’t stop buying their underwears second new product development.
04:00 - Obviously, you would have not known Apple today, if they would have slept with their bums facing the fan after their first iPhone, one hearts of the people.
04:09 - It is one thing to develop a successful product, but then all products mature.
04:14 - And as that happens, the business need a new engine for growth Apple.
04:17 - Keep coming with new iPhone every couple of years, which has features that attract more customers.
04:23 - Not only that you will know if you look at the history that how the products that apple offers Have evolved over years, keeping the growth engines of the company running, third, efficient research and development.
04:38 - Google started off as a search engine. And over a year, spent huge amount of money and research and development their project of Google Map started from a very small scale and slowly expanded today.
04:48 - You can literally feel yourself walking on a track on Google Maps.
04:52 - Google uses its map to acquire a lot of data about people which further help them in researching analyzing and growing the In business of advertisement.
05:01 - Today, one cannot imagine traveling or driving without Google Maps.
05:06 - Just imagine if they just started charging, you one dollar per month for using Google Map tip profit would increase in billions but they don’t charge you a dime.
05:16 - Their expense of running. Google Maps is like investing in research and Analysis it will give them outside profit and Edge in the future.
05:25 - As we know that data is the new oil, fourth does a product have about Above average product quality.
05:31 - A company may be selling a product but it has no meaning.
05:34 - If the product is of poor quality customers return to buy Burgers from McDonald’s, because the burgers are of good quality customers, using the product must be satisfied and would want to shed off some money to buy the product again and again, almost all the great Brands pay large emphasis to Quality even at the cost of little higher expenditure, this helps them keep their customers loyal and onto I said, 50 does the company have high profit margins profit? Margins means how much profit you earn on the sale of a product worth $100, if you sell a water bottle, $400, however, filling the water and buying the bottle cost, you $60.
06:16 - Then the difference is the profit margin, which in this case is 40% higher profit, margins in comparison with the competitors means company is able to charge premium for the product.
06:29 - This is a Good sign, high and growing number of sales are of no use, if a long-term, they do not increase profits, Warren, Buffet calls this Principle as economies of scale a good business, which has high sales and improving profit.
06:43 - Margin is the one where, by increasing the sale of the product two times, the profit increases four times or even more.
06:51 - For example, the sales number of apple has grown from 13 billion dollars in 2005 to 275, Five billion dollars in 2021, an increase of 21 times in 16 years.
07:06 - Can you make a guess how much would the prophets have grown? The prophets after-tax have grown from 1 billion dollar in 2005, 257 billion dollar in 2021.
07:18 - A gigantic gain of 57 times whether sales just grew 21, times 6.
07:25 - What is the company doing to maintain the profit margins? This is almost It’s like the second point, the present profit margins may be good but you will end up losing money.
07:35 - If the business has no plans to maintain the same profit margins, Xerox was a wonderful business.
07:41 - Its copier had record sales year. After year, the owners became lazy and did not do much to maintain the same momentum in future.
07:50 - Seventh are the employees in the company.
07:52 - Happy employees are the backbone of the company.
07:56 - If the increase in profit that you’re seeing, is because of the cell.
07:59 - Cuts of the employees at lower levels. That is not an ideal situation.
08:04 - If employees are not happy to work in a particular company that speaks badly of the future prospects of it.
08:11 - A company with employers going on strike against management again and again is an example of what you must stay away from eight are the executives in the company happy and transparent.
08:22 - As much as work environment of employees at lower levels is important.
08:26 - You must know whether the people at the executive levels are Happy working in the company and transparent ninth, does the company have depth in its management? A company need to be able to survive on its own without relying solely on one? Brilliant manager, Elon Musk is an example, with Tesla.
08:46 - Verse musk is gone will Tesla continue to grow and continually come up with wind blowing and ambitious plans to change the world.
08:54 - Some businesses have such a great management system that the business actually runs on autopilot.
09:00 - It was this principle which led buffets say I like to own businesses, which even an idiot can run 10th, does the company have good accounting? If there is a pizza company and if it does not know that, which pizza gives them the highest revenue and which the lowest the like, a foolish person company would be investing their money when they were selling pizza.
09:22 - Making no good use of the money. Thus, it is prudent for a company to know that what section of the business produce.
09:29 - How much income Um, only then can they analyze and improve the business number 11? How are the industry specific numbers? Every type of business has a peculiarity and a particular Financial number that can tell you about strength of the business.
09:45 - For example in banking business important metric to see is non-performing assets called NPA, which means bad loans, which means how much percentage of loans given by the bank have been defaulted.
09:59 - And are not being paid. The lesser, the NPA number, the better.
10:04 - It is for banks. If there is an important business related metric, you must just look at it.
10:10 - Number 12, what is the company’s outlook on profit? Some companies will conduct their Affairs.
10:16 - So as to gain the greatest profit, right now, others will deliberately curtail maximum immediate profits to build up Goodwill and thereby gaining greater overall profits over a period of years.
10:29 - Amazon is the biggest example of this for years.
10:32 - Amazon offered products at much Deep Discount in the market price paying money from their pocket to the vendors to attract customers in the initial years.
10:42 - This led Amazon take a hit on the prophets, you will not believe that for the first 17 quarters after the shares of Amazon were listed.
10:51 - It was running under losses. Had Amazon wanted.
10:55 - They could have sold Goods at market price or just a little less than the market price.
11:00 - But to gain the online customers. They played this game of delaying.
11:03 - The monetization had Amazon ran behind gaining profits in the short term.
11:09 - It is very evident that they would have not been as successful as they are today, you are a long-term investor and it is in your best interest.
11:17 - If the owners vision of the company is also long term, number 13, Financial strength.
11:23 - Phil is a great advocate of not investing in companies which are overburdened with did, what is better, is the company with me? Negligible debt and a business where its profits can take care of its further expansion without raising any money from outside Microsoft, after initial investment of 1994 has actually never raised a single dollar to grow their own business.
11:45 - All these years, it has been growing on the past years profit.
11:49 - That must be the company. You must desire to invest in.
11:53 - Number 14, good relationship with investors profit disappointments, shifts in demand for This product field, product launches Etc, are the unavoidable reality for even the most successful companies, the key is transparency.
12:08 - The management team has to open about such matters.
12:12 - Companies that clam up our companies to avoid number 15 last but not the least, the business owners must have unquestionable integrity.
12:21 - The company’s management team is closest to the businesses assets, then the stockholders, if you can’t trust that the execute, Devs manage these assets to the best of the abilities on behalf of the stockholders.
12:35 - There can be no discussion, the idea must be placed in.
12:38 - No, thanks pal, lesson number two, when to buy despite the company’s growth potential, the performance of the business depends on few other factors which are economic cycle.
12:50 - That is with the economy is booming or in a recession, the attitude of government technological innovation inflation and lat.
12:59 - But not the least, the interest rates at which banks give loans to businesses.
13:04 - Fisher says that it is humanly impossible to accurately time the market assessing.
13:09 - All these factors at a particular time though.
13:13 - These factors sound highly economy-related.
13:16 - But there is also a code which goes, like if economists could predict what stock market is going to do, they would have been the richest people which is not the case.
13:27 - Once you find such a company which satisfies Cause most of the points in 15 Point checklist.
13:32 - Fisher says, such a company is a remarkable one.
13:35 - Once you find a remarkable company where can only be two ways about it first, that it can be priced expensively than other of its peers.
13:45 - And the reason for it is pretty much because it is a remarkable business and the second that it is priced fairly in your opinion, or below, its fair value in the latter case, Fisher says that you must just buy as much of sir.
13:59 - Type of company as you can at such a price.
14:03 - And as the company does well and grows as expected, you can add more money to it.
14:09 - However, if the stock price is coated expensive, then you can still invest a small amount and wait to deploy rest of the money.
14:17 - Most of the times, every business and investors Behavior, go through cycle.
14:21 - What seems expensive today? Due to exuberance of investors? May seem left out five year, hence, in that case after it.
14:29 - Initial investing a part of your Capital. You can wait to buy the stock at the price which seems Justified to you for its value and growth Prospect.
14:38 - But you need to take this with a pinch of salt because you must have that kind of patience to wait to buy the stock at a reasonable price.
14:47 - Potential companies that need the 15 points of buying will always regain the position and Rise through downturns and depression.
14:55 - It is crucial to have patience as companies will always come.
14:59 - The solution to overcome economic, downfalls lesson, number three.
15:04 - When to sell, this is the most asked question in an investing Community, social lays out three scenarios where it would be in best interest of an investor to sell a stock first.
15:16 - When an investor realizes that he has made a bad decision of buying the stock.
15:20 - It requires a great amount of self control and self honesty to admit that we made the wrong judgment.
15:27 - It is common to make a bad decision as the the entire process of buying a potential stock is very complex handling.
15:34 - This situation is often inhibited by individual ego, as nobody likes to admit that they were wrong, selling bad Investments as early as possible.
15:44 - Minimizes once loss and opens the opportunity to invest the remaining funds into an alternate outstanding stock.
15:52 - The second reason for an investor should sell a stock is when the company degrades over time and fails to meet the 15 reasons for.
15:59 - Which it was bought a potential company can degrade as management.
16:04 - Changes over time. For the industry as a whole suffers the third reason and investor should sell a stock is when he finds a better investment opportunity switching to better stocks is the best decision even with the hassle that comes with it before making such Investments, which has an investor must extensively analyze the situation and minimize risk related to misjudgment lesson.
16:26 - Number four, the Dividends are overrated.
16:29 - When a company distribute part of the profit to its stockholders, it is called dividend a company, which is not paying dividends is not necessarily A Bad Company.
16:39 - It might signify that the company wants to set up a new plant invest in a better project, this will make a company generate better profits in the long run, a person who needs current income should invest in a dividend paying stock.
16:51 - However, a long-term investor shouldn’t be bothered about dividends.
16:55 - We as investors get carried away by seeing huge In a growing company will most likely not paid dividends at all for several years before its price appreciation stops at the end of the day.
17:08 - The important factor is where the capital can be employed in order to provide the highest value to the shareholders.
17:14 - If suppose my channel is monetized by YouTube, and I start earning money from it.
17:20 - Then either I can use that money to pay myself from which I can party with my friends, go traveling, or what I can do is Is I can use the money to buy more books on investing which I can use to make more videos or use that money to advertise my YouTube channel in geographies, where no one knows about me, which will help me on higher revenues and I can keep repeating the process.
17:47 - So, for this reason, paying dividends to the stockholders, may not be the best use of money for a company lesson.
17:54 - Number five, the don’ts for investors.
17:58 - Don’t buy Young companies. The young companies have no experience.
18:01 - The management is new though, their aspirations are big, but anyone who starts a business has big aspirations.
18:09 - These young companies may become the next big thing, but guessing for such a thing to happen is gambling.
18:15 - It is just like predicting whether a newborn baby from womb will win a National boxing middle.
18:21 - When he’s 18, you may get it right? But that does not mean that the inside is superior.
18:27 - It just means that you were lucky. Don’t quibble of sense and quarters.
18:32 - When you find a remarkable stock is available at an attractive price.
18:36 - Don’t wait for it to fall a dollar or ten dollars more in such a case many a times.
18:42 - The stockmen never come to the price level that you wanted it to come and just for a couple of dollars, you may miss the chance of buying a remarkable business who stock price made then appreciate for a decayed.
18:55 - Don’t be afraid of buying in a pessimistic.
18:57 - Time pessimistic times can lead to Good, buying opportunities investors sell of excessively when a situation of worry arrived, which in turn makes a lot of Securities, undervalued.
19:09 - These situations may be recession situations of War, terrorist attack, Etc.
19:14 - Too much, not be afraid and by wholeheartedly, don’t overstress diversification.
19:20 - People in the investing field are paranoid about diversification.
19:24 - The number of stocks in your portfolio is immaterial.
19:27 - If you do not know anything about Out the business, rather it is dangerous to invest in business about which, you know, nothing about any remarkable business within themselves are.
19:37 - Sufficiently Diversified. They just don’t sell one product but have a diversified portfolio.
19:42 - For example, Amazon Amazon, earns its Revenue, not just from online shopping but also by selling advertisement Space by providing transportation services, the even make products for sale by the name of brand amazonbasics.
19:58 - They also A huge revenue from the media platform, Amazon Prime.
20:03 - So from far, it may look like just one company, but if you go closer remarkable, businesses already have diversification within their businesses, there are actually only a very few business would take most of the categories of 15 Point checklist, Phil recommends to own, not more than 5 stocks with an allocation of not more than 20%.
20:25 - Each with all 5 stocks belonging to companies in different Industries.
20:29 - He’s however, if one of the stock perform exceptionally and becomes 40 percent of your portfolio, then you must not sell it to make it twenty percent again, rather let it be like that.
20:41 - He says, never cut your flowers, nurture them, let’s have a quick recap in order for purchase of a company.
20:47 - You have to dig deeper like a detective and see if the stock takes most of the points in Fishers 15 Point checklist which in Broad manner must have a product with huge growth potential higher.
20:59 - Margins have long-term outlook on business competitive and honest management.
21:05 - Once you find a company that satisfies a 15 Point checklist and available at a fair or cheap price, you must not wait to buy as much as you can.
21:13 - If it is available at expensive price, you must still by a small quantity and wait for it to be available at a lesser price in.
21:20 - Future Fisher says that it is humanly impossible to accurately time.
21:24 - The market. Assessing all the economic factors at a particular time.
21:28 - A recession is a the best time to buy these businesses because most of the stocks are cheap during this time.
21:34 - You must sell a stock. If you realize you made a mistake in assessing the stock in the 15-point checklist or made a bad decision in a hurry or over the time.
21:44 - The company has degraded and fails to qualify most of the points in a checklist, which it once did.
21:50 - And last, but not the least. If you find a better investment opportunity, people pay too much attention to the dividend payment of a company, a really great management will Is find ways to invest in businesses, develop a new product, which, in future increases, the profits of the company, handling of prophets in the hands of stockholders, is not the best utilization of money according to Fisher as an investor you must avoid young companies, don’t be paranoid to buy a great businesses at a particular price.
22:19 - If you get it in range that you think is cheap by in loads of $1. 00 here.
22:24 - And there will make no difference. Don’t be afraid of buying in a pessimistic times.
22:29 - Pessimistic times can lead to a good buying opportunities, investor sale of excessively, when a situation of worry arrives, don’t overstress diversification.
22:39 - The number of stocks in your portfolio is immaterial.
22:42 - If you do not know anything about the business, Phil recommends to own, not more than 5 stocks with an allocation of non more than 20 percent each.
22:49 - And if any of it grows more than 20%, Then don’t reduce the size to make it twenty percent again.
22:56 - Rather let it be like that because never cut your flour.
22:59 - Nurture them. That’s it. Guys, if you like the video, please, like, share and subscribe.
23:05 - You can also check out my past video in which I have covered the summary from the book.
23:11 - How to avoid laws and on consistently in stock market.
23:14 - I will come again next week with a summary of another book on investing of Finance until then.
23:22 - Cheers, guys. .