In his book Common Stocks and Uncommon Profits, Phil Fisher makes the point that it is not what is currently known about a company’s cash flow that matters, but rather, what comes to be known about a company’s profit potential in the years after we buy a given stock.
As Fisher says on page 64 of his book, “Some companies are in the seemingly fortunate position that they can maintain profit margins simply by raising prices. This is because they are in industries in which the demand for their products is abnormally strong or because the selling prices of competitive products have gone up even more than their own.”
This is why I love “indispensable products.” They have the ability to raise prices every year. As a customer, that sucks. As a part owner of a business, that is great. Your kid is going to eat cereal. That is … Read the rest of this article!