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Wise words from an old market sage

A strong finance function, so it says, can provide an early warning system to identify influences that could threaten the profit plan sufficiently far ahead of time to prepare and take appropriate action.

Sounds to me like the kind of forward-looking, value-creating agenda with which readers of this magazine will be familiar. I heard similar sentiments being expressed in a meeting this morning with a software company, one that operates in the budgeting and planning sector that is now blighted with ‘performance management’ TLAs such as BPM, CPM and EPM.

But the document I’ve just read didn’t come from a software vendor, it came from an investment textbook published in 1958. Common Stocks and Uncommon Profits was written by American investment genius Philip A Fisher, a man whose writings heavily influenced the investment strategy of Warren Buffett, the second-richest man in America. We are delighted to have the opportunity to reproduce an extract from this classic, recently reissued by John Wiley, in this and the next two issues.

Why are we interested in a 45-year-old book for investors? The answer lies in the second sentence of the chapter entitled, ‘The Fifteen Points to Look for in a Common Stock’. As Fisher says, these 15 points also describe the attributes that a company should have so as to give it the greatest likelihood of attaining investment gains of several hundred (!) per cent over a period of years.

As might be expected from a half-century-old American book, the language is as unfaddish as the ideas (it lends itself well to being read aloud – think Spencer Tracy). But it rewards meticulous readers with what might be called statements of the blindingly obvious that serve as touchstones for sound decision-making over the medium and long term, even if at the expense of short-term ‘quick wins’. In that respect at least, let it serve as a shield in the battle against the short-termists.

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