While investing in the share market, having a checklist can immensely reduce the chances of picking wrong stocks. An investor can quickly eliminate the companies which don’t meet most of the points in their checklist.
However, building a good investment checklist is not an easy task, especially for beginners. Enter 15 Points Checklist for Stock Investing by Philip Fisher.
In his book, “Common stocks and Uncommon profits”, Philip Fisher dedicated an entire chapter on “fifteen points to look for in a common stock,”, which later turned out to be a holy grail for many of the growth investors. Here is Philip Fisher’s 15 points checklist to look into common stocks before investing.
- Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
- Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?
- How effective are the company’s research and development efforts in relation to its size?
- Does the company have an above-average sales organization?
- Does the company have a worthwhile profit margin?
- What is the company doing to maintain or improve profit margins?
- Does the company have outstanding labor and personnel relations?
- Does the company have outstanding executive relations?
- Does the company have depth to its management?
- How good are the company’s cost analysis and accounting controls?
- Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?
- Does the company have a short-range or long-range outlook in regard to profits?
- In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders’ benefit from this anticipated growth?
- Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur?
- Does the company have a management of unquestionable integrity?
Read more here: Philip Fisher’s 15 Points Checklist for Stock Investing.
Note: Philip Fisher mentioned that it’s highly unlikely that a company will meet all the 15 points in his checklist. However, if the company fails to meet the majority of these points, then it definitely is a danger point for the investors.
So, while picking your next stock, go through the 15 points by Philip Fisher and try to analyse how many of these points are met by that company. Happy Investing!