In one sentence: Common Stocks and Uncommon Profits is Philip Fisher’s foundational 1958 guide to growth investing, arguing that the surest path to great returns is to find a small number of genuinely outstanding companies, research them deeply through his “scuttlebutt” method and fifteen-point checklist, buy them, and then hold them for the very long term, almost never selling.
At a Glance
Author: Philip A. Fisher
First published: 1958 (Harper & Brothers)
Category: Finance / Investing
Length: 320 pages, about 117,000 words (Wiley Investment Classics collected edition)
ISBN-13: 978-0-471-44550-0 (Wiley Investment Classics collected edition)
Summary reading time: about 12 minutes
Book reading time: about 8 hours
Notable adaptations: none, though it became one of the most influential investment books ever written and deeply shaped Warren Buffett
Philip Fisher was a pioneering growth-stock investor who ran a small, deliberately exclusive money-management firm for decades and famously held some stocks, like Motorola, for the rest of his life. This Wiley edition collects three of his works: the original Common Stocks and Uncommon Profits (1958), Conservative Investors Sleep Well (1975), and the autobiographical Developing an Investment Philosophy (1980). Together they lay out a qualitative, research-intensive approach to picking companies that stands as the classic counterpart to Benjamin Graham’s more quantitative value investing, and Buffett has said he is part Graham and part Fisher.
Read it if you want the intellectual foundation of growth investing from one of its originators. It is thoughtful and principle-driven rather than formula-driven, and its examples are dated to the mid-twentieth century, but its core logic about what makes a business exceptional has aged remarkably well. Note that Fisher is describing his own philosophy, not giving personalized advice, and this summary is not financial advice.
The Big Idea
Fisher’s central conviction is that the biggest fortunes in the stock market come not from trading in and out but from identifying a handful of truly superior growth companies and holding them for years or even decades as they compound. Rather than trying to buy cheap and sell dear on the business cycle, he argues you should concentrate on finding businesses with long runways of sales and profit growth, run by outstanding, honest management, and then largely ignore market fluctuations. The hard part is the research, which is why he built two tools: the “scuttlebutt” method of learning a company’s real strengths and weaknesses from the people around it, and a fifteen-point checklist of the qualities that define a genuinely exceptional business. Get the selection right, he insists, and the time to sell is almost never.
Key Ideas
1. Scuttlebutt: the business grapevine
Because you can’t personally audit every part of a company, Fisher advocates gathering intelligence from its ecosystem, questioning competitors, customers, suppliers, former employees, and industry insiders about how the business really operates. Ask five competitors about the other four, he says, and a surprisingly accurate picture emerges. This qualitative, on-the-ground research, which his son later called a craft that matures into an art, is what lets an investor judge management quality and competitive strength long before it shows up in the published numbers.
2. The fifteen points
At the book’s core is a checklist of fifteen qualities to look for in a stock. They span the business, does it have products with years of growth ahead, is management determined to keep developing new lines, is its research effective, its sales force strong, its profit margins worthwhile and defended, its cost controls tight, and the people, are labor and executive relations good, is management deep, candid in bad times, and above all of unquestionable integrity. A company can miss a few points and still be a winner, but it must not fail many, and no other virtue can compensate for management that lacks integrity toward its shareholders.
3. When to buy
Fisher is dismissive of trying to time the market by forecasting the economy, comparing economic prediction to alchemy. Instead he ties buying to company-specific events, especially the moments when a fundamentally excellent firm hits temporary, well-understood trouble, a new plant’s costly shakedown period, a strike, a market misjudgment, that depresses the price of a great business. The discipline is to act on what you actually know about a specific company rather than on hopes or fears drawn from conjecture about the market as a whole.
4. When to sell: almost never
Fisher argues there are only three legitimate reasons to sell a well-chosen stock: you realize you made a mistake in the original purchase, the company no longer measures up on the fifteen points because management has deteriorated or its growth has slowed to the pace of the economy, or you find a distinctly better opportunity and are very sure of it. Selling out of fear of a bear market, because a stock seems overpriced, or simply because it has risen a lot are all invalid. If the purchase was done right, he concludes, the time to sell is almost never.
5. The truth about dividends
Fisher pushes back on the reflexive worship of dividends. For an investor seeking long-term growth, earnings retained and reinvested by an outstanding company, in new plants, products, or cost savings, can create far more wealth than the same money paid out as dividends. A little extra current income, he writes, pales next to the future fortune that skillful reinvestment can build. High dividends make sense for those who need the income, but investors chasing appreciation should downgrade dividends sharply and favor strong companies that plow earnings back in.
6. The conservative investor and the four dimensions
In Conservative Investors Sleep Well, Fisher defines a truly conservative investment as one most likely to preserve purchasing power at minimum risk, and distinguishes it sharply from a merely conventional one. He evaluates it across four dimensions. The first is functional excellence in production, marketing, research, and finance. The second is the “people factor” of a delegating leader, a cohesive team, and promotion from within. The third is the inherent business characteristics, scale, technology, and marketing franchise, that protect above-average margins. The fourth is price, governed by his law that every significant move in a stock reflects a changed appraisal by the financial community rather than a change in the business itself.
7. Concentrate, and don’t follow the crowd
Fisher warns against over-diversification, arguing that spreading money across too many stocks guarantees you own businesses you don’t understand well, and that for an individual, holding more than about twenty stocks is a sign of financial incompetence. Better to own a concentrated handful of the very best. He also prizes independent judgment: the largest profits go to those who correctly “zig when the financial community is zags,” but contrary opinion alone is worthless, and you must combine it with superior knowledge and the courage to act. Success, he concludes, rests on hard work, sound judgment, and honesty, qualities that can be cultivated through self-discipline.
Context and Analysis
Common Stocks and Uncommon Profits earned its status as a classic because it did something few investment books do: it took the qualitative side of investing, the things you cannot easily reduce to a ratio, and made them rigorous. The scuttlebutt method and the fifteen points are genuinely useful frameworks for thinking about what makes a business durable, and Fisher’s insistence on management integrity, long time horizons, and concentration in a few outstanding companies profoundly influenced later investors, Buffett most famously. The book’s greatest strength is its focus on business quality over market noise, a lesson as relevant now as in 1958.
The fair criticisms are worth weighing, and Fisher would be the first to say his method is demanding. Scuttlebutt research is time-consuming and largely impractical for ordinary investors, who lack access to industry insiders, and the approach relies heavily on judgment that is hard to teach and easy to get wrong. The examples are decades old, and the specific companies and industries he discusses require translation to today’s world. His confidence that a great company can be held almost forever underplays how often even excellent businesses are disrupted, a risk far more visible now than in his era, so the “almost never sell” rule demands real vigilance about deterioration. And concentration, while powerful when you’re right, magnifies the damage when you’re wrong. Read as a durable framework for thinking about business quality rather than a turnkey system, though, it remains essential.
On this site it pairs naturally with The Warren Buffett Portfolio, which shows how Fisher’s emphasis on quality and concentration merged with Graham’s value discipline in the practice of the investor Fisher most influenced, and with Poor Charlie’s Almanack, whose insistence on deep, multidisciplinary understanding of a few great businesses is Fisher’s philosophy carried forward by Charlie Munger.
How to Apply It
Fisher’s philosophy translates into a clear discipline:
1. Hunt for a small number of genuinely outstanding growth companies rather than many mediocre ones, and judge them against the fifteen points. 2. Use scuttlebutt: research a company’s real strengths by talking to its customers, competitors, suppliers, and others around it, not just reading its reports. 3. Buy based on what you know about a specific company, often when a great business hits temporary, well-understood trouble, rather than trying to time the market. 4. Once you own an outstanding company, hold it for the long term and sell only if you made a mistake, the business fundamentally deteriorates, or you find a clearly superior opportunity. 5. Concentrate your capital, downgrade dividends if you seek growth, think independently, and keep watching for genuine signs that a holding no longer measures up.
Memorable Lines
“If the job has been correctly done when a common stock is purchased, the time to sell it is almost never.” (Philip A. Fisher)
“In the field of common stocks, a little bit of a great many can never be more than a poor substitute for a few of the outstanding.” (Philip A. Fisher)
“It is the making of a sale that is the most basic single activity of any business.” (Philip A. Fisher)
“The largest profits in the investment field go to those who are capable of correctly zigging when the financial community is zagging.” (Philip A. Fisher)
“In the stock market a good nervous system is even more important than a good head.” (Philip A. Fisher)
“A profit should never be taken just for the satisfaction of taking it.” (Philip A. Fisher)
Should You Read the Full Book?
Verdict: Recommended
This summary carries Fisher’s framework, scuttlebutt, the fifteen points, when to buy and the three reasons to sell, his case against overstressing dividends, the four dimensions of a conservative investment, and his rules on concentration and independent thinking, which is the core of his philosophy. But Common Stocks and Uncommon Profits rewards a full reading, because Fisher’s reasoning is subtle and much of the book’s value lies in how he thinks through each point, the nuances of what distinguishes a durable grower from a one-time spurt, or a temporary setback from real deterioration, which a checklist alone cannot convey. The autobiographical Developing an Investment Philosophy is especially worth it, since Fisher walks through his own decades of holdings, triumphs like Motorola and Texas Instruments, and candid accounts of his mistakes, showing the method in a real life rather than the abstract. Read the whole book if you’re serious about investing and want the qualitative foundation beneath modern growth and quality investing, and treat its dated examples as illustrations of timeless principles. As the original articulation of how to find and hold great companies, it remains indispensable.
Warren Buffett recommends Common Stocks and Uncommon Profits. The quote, and the source it came from, are on the book page.