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Common Stocks and Uncommon Profits and Other Writings
Improve your investment strategy
- Read in 15 minutes
- Audio & text available
- Contains 9 key ideas
Common Stocks and Uncommon Profits gives you all the information you need to make smart investments, regardless of your investment style. Whether you’re looking for huge profits or simply to maintain existing funds, this book shows you the path to success.
Key idea 1 of 9
Smart investment strategies focus on companies with long-term growth potential.
The common perception of investing is that it is fast-paced and brutal, with investors buying and selling seemingly on a whim, seeking quick profits above all.
Yet smart investing involves much more thought and planning, and is ideally focused on the long term. Smart investors don’t seek quick profits but instead looks for companies with growth potential that over time will multiply an initial investment.
It isn’t easy to identify which companies offer this kind of growth potential. Indeed, many stocks are either over- or undervalued, which can make investing difficult.
Smart investors look for companies with potential that are nonetheless still undervalued, as such companies can, when the time is right, grow with such rapidity that an investor can double or even triple his initial investment.
Luckily, companies with growth potential can be recognized by their common characteristics.
Such companies offer products and services that ideally could sustain high sales volumes for at least a few years. Companies with good growth potential also invest in research and development, to continue growing even when a current product line no longer offers opportunities for growth.
The 1950s, for example, was a great time for television manufacturers. But by the middle of the decade, nearly everyone who wanted a black-and-white TV already had one. This meant that, until the color television was developed, TVs companies faced flat growth; so they had to adapt.
Motorola, now known for mobile phones, used to produce televisions and radios. But management had the foresight to harness the company’s technical skills and experience to enter the two-way communication business, and continued to grow sales while other TV manufacturers’ sales flatlined.
Companies with high growth potential also have a solid management team and good employee relations. Don’t invest in a company whose employees are too busy squabbling to be productive, and whose executives can’t inspire solidarity or a shared vision in the workforce.