Last year Warren Buffett did a great interview with Becky Quick at CNBC in which he discussed how he uses Phil Fisher’s ‘Scuttlebutt Method’ for finding investments. Phil Fisher wrote a investing classic called, Common Stocks and Uncommon Profits. Scuttlebutt means rumors or gossip about a particular product or company from a collection of sources.
Here’s an excerpt from that interview:
Southpoint Qualified Fund and Southpoint Qualified Offshore Fund returned 2.5% net for the first quarter, compared to the S&P 500's 6.2% return and the Russell 2000's 12.7% gain. During the first quarter, Southpoint's funds averaged 133% long and 70% short. Q1 2021 hedge fund letters, conferences and more The fund's long positions added 13% gross Read More
Buffett: Well, I’ve, yeah, I had learned that from a fella named Phil Fisher who wrote this great book called “Common Stocks and Uncommon Profits.” He calls it the scuttlebutt method.
Phil was a remarkable guy. I first used it back in 1963 when American Express had this great Salad Oil Scandal that people were worried about it bankrupting the company. So I went out to restaurants and saw what people were doing with the American Express card, and I went to banks to see what they were doing with travelers’ checks and everything. Clearly American Express had lost some money from this scandal, but it hadn’t affected their consumer franchise.
So I ask people about products all the time.
When I take my great-grandchildren to Dairy Queen they bring along friends sometimes. They’ve all got a iPhone, I ask ’em what they do with it and how … whether they could live without it, and when they trade it in what they’re gonna do with it.
Of course, I see when they come to the furniture mart that people have this incredible stickiness of — with the product. I mean, if they bring in an iPhone, they buy a new iPhone. I mean it just has that quality. It gets built into their lives. Now, that doesn’t mean something can’t come along that will disrupt it. But the continuity of the product is huge, and the degree to which their lives center around it is huge. It’s a pretty nice franchise to have with a consumer product.
For more articles like this, check out our recent articles here.