Investing Frameworks
Phil Fisher's 15-Point
Investing Checklist
A timeless qualitative framework for identifying outstanding long-term investments. Learn how to apply these questions to your own stock research and find companies with massive growth potential.
Why Use a Qualitative Checklist?
While quantitative screening (P/E ratios, margins, growth rates) tells you where a company has been, qualitative analysis tells you where a company is going. Philip A. Fisher outlined these 15 points in his classic book Common Stocks and Uncommon Profits to help investors identify businesses with exceptional management and sustainable competitive advantages.
Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
How to find it: Look for industry Total Addressable Market (TAM) reports, secular growth trends, and the company's historical revenue growth in their annual reports (10-K). Determine if they are in a growing industry or simply taking market share in a stagnant one.
Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials?
How to find it: Read management's Discussion and Analysis (MD&A) in the 10-K, listen to earnings call Q&A sessions, and review investor day presentations. Look for a track record of successfully expanding into adjacent markets or launching complementary product lines.
How effective are the company's research and development efforts in relation to its size?
How to find it: Compare R&D spending as a percentage of revenue against competitors. More importantly, look at the output: what percentage of current revenue comes from products launched in the last 3-5 years? High spending with no new successful products is a red flag.
Does the company have an above-average sales organization?
How to find it: This is harder to quantify. Look at Customer Acquisition Cost (CAC) trends over time, read employee reviews from sales staff on Glassdoor, and evaluate the company's reputation among industry buyers or on peer review sites (like G2 for software).
Does the company have a worthwhile profit margin?
How to find it: Analyze the income statement. Calculate gross margins and operating margins, then compare them against direct competitors over a 5-to-10-year period. Consistently higher margins usually indicate a strong competitive moat or pricing power.
What is the company doing to maintain or improve profit margins?
How to find it: Listen to earnings calls for discussions on pricing power, cost-cutting initiatives, automation, and economies of scale. Are margins improving because of temporary factors (like low commodity prices) or structural improvements in the business?
Does the company have outstanding labor and personnel relations?
How to find it: High employee turnover is expensive. Check Glassdoor/Indeed ratings, look for mentions of labor disputes or strikes in the news, and see if the company frequently appears on "Best Places to Work" lists.
Does the company have outstanding executive relations?
How to find it: Look at executive turnover rates. Review the proxy statement (DEF 14A) to understand compensation structures—are executives incentivized for long-term value creation or short-term stock bumps? High insider ownership is usually a positive sign.
Does the company have depth to its management?
How to find it: A great company isn't a one-man show. Check the proxy statement for the backgrounds of the top 5-10 executives. Do they promote from within? Is there a clear, documented succession plan for the CEO and other key roles?
How good are the company's cost analysis and accounting controls?
How to find it: Look for consistent margins during industry downturns. Read the footnotes in financial statements regarding inventory valuation and depreciation. Frequent restatements of earnings or material weaknesses identified by auditors are massive red flags.
Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues?
How to find it: Understand the specific Key Performance Indicators (KPIs) for the industry. For retail, it's same-store sales; for SaaS, it's Net Retention Rate (NRR) and churn; for banks, it's net interest margin and loan defaults. Master the industry-specific metrics.
Does the company have a short-range or long-range outlook in regard to profits?
How to find it: Does management obsess over hitting quarterly guidance, or do they focus on multi-year strategic goals? Read annual shareholder letters. Companies that are willing to sacrifice short-term earnings to invest in long-term growth often make better investments.
In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares will largely cancel the existing stockholders' benefit?
How to find it: Check the cash flow statement. Does the company generate enough Free Cash Flow (FCF) to fund its own growth? Check the history of "Shares Outstanding" on the income statement to see if they are constantly diluting shareholders to raise capital.
Does the management talk freely to investors about its affairs when things are going well but "clam up" when troubles occur?
How to find it: Read earnings transcripts from quarters where the company missed expectations or faced a crisis. Do they take responsibility and explain the path forward, or do they blame macroeconomic factors and dodge analyst questions?
Does the company have a management of unquestionable integrity?
How to find it: Look for related-party transactions in the proxy statement (e.g., the company leasing a building owned by the CEO). Investigate past regulatory fines, aggressive accounting practices, or a history of over-promising and under-delivering.
Systematic Analysis with OSV Checklists
Applying consistent, systematic, and objective analysis using a checklist is proven to help investors produce better results in the long run. The Old School Value dashboard includes a powerful built-in Checklist tool to keep your research disciplined and emotion-free.
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