These points are mentioned by Philip A. Fisher in his book "Common Stocks and Uncommon Profit" and he called it Scuttlebutt. But are these points really helpful? Well before starting with scuttlebutt make sure you understand the business and the company and whose data you can easily find. You can apply scuttlebutt in newly listed companies also. But it'll be better you apply it on already listed companies whose 5-10 years data can be easily obtained. Also you know that bargains can be only found in second hand products so why to invest in new products.
Also it is not important that company complies with all the 15 points and 9-10 points will give you the indication/intuition about whether to invest or not. During Fisher's days he himself has to go and meet people but in today's Information Technology world you can very well take the use or several applications like orkut, face book yahoo groups or Google groups, also just Google about the company and get each and every bit of information you can get about the company, like news, future prospects, interviews of the managers etc.
Now let's me write all the 15 points of scuttlebutt:-----
1) Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
2) 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?
3) How effective are the company's research and development efforts in relation to it's size?
4) Does the company have an above average sales organization?
5) Does the company have a worthwhile profit margins?
6) What is the company doing to maintain or increase it's profit margins?
7) Does the company have outstanding labor and personnel relations?
8) Does the company have outstanding public relations?
9) Does the company have depth to its management?
10) How good are the company’s cost analysis and accounting controls?
11) Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investors important clues as to how outstanding the company may be in relation to its competition?
12) Does the company have a short-range or long-range outlook in regard to profit?
13) 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?
14) Does the management talk freely to investors about it’s affair when things are going well but clam up when troubles and disappointments occur?
15) Does the company have a management of unquestionable integrity.
These were the 15 points of scuttlebutt. It’s true that no one method is enough to find great company. But in my view the best start will be know what the company does and if you see that company’s business has a great growth potential and can grow itself like a tree with many businesses connected to the main business of the company. Scuttlebutt is difficult but in today’s internet age NO WAY!!!!!. Just think about Mr. Fisher where he had to directly deal with company people and customer , but today even using orkut communities of almost all of the companies you can get any information you want.But yes you have to be careful not to ask something which is internal to the company.
Thanks
