Common Stocks and Uncommon Profits
Module Units
- 1. Introduction
- 2. Clues Of The Past
- 3. What “Scuttlebutt” Can Do?
- 4. The 15 Points To Look For In A Common Stock
- 5. What To Buy
- 6. When To Buy
- 7. When To Sell
- 8. Dividends
- 9. 5 Don'ts For Investors
- 10. 5 More Don’ts for Investors
- 11. How Do I Go About Finding A Growth Stock?
- 12. Eternal Principles
- 13. Conservative Investors Sleep Well
- 14. The Second Dimension Of A Conservative Investment
- 15. The Third Dimension
- 16. The Fourth Dimension
- 17. Developing An Investment Philosophy
- 18. Conclusion
The Third Dimension
Nothing is more vital than the profitability of a company. The author says a company that is experiencing high profits is bound to attract new competitors. There are two ways by which a company can sustain its profits:
A. Monopoly - Monopolies are generally illegal, and Fisher doesn’t recommend investing in them.
B. Efficiency - Fisher says that the only way a company can sustain its profits is by operating more efficiently than others.
A company should have the following characteristics if it wants to sustain its profits:
- Economies of scale.
- Low Freight costs.
- Lower costs of production and the ability to attract new customers.
- A prominent shelf place for a product can attract more sales.
- As a company’s costs rise, it should not raise the price of that product more than its competitors.
- Technological Development is another aspect which should be looked into when making an investment.
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