1/30/2024 0 Comments Scuttlebutt method to investingWhy do they continue to use the company’s products/services? What would motivate them to switch to a competitor? How difficult would it be for them to switch to the competition.Ģ) It is a form of primary research as compared to secondary research like reading financial statements and other company materials. Current and former customers can also be an extremely valuable source for assessing a company’s moat and potential switching costs. Former employees and current employees can provide valuable insights about employee morale and sentiment. In my opinion, scuttlebutt research is important for two key reasons:ġ) It provides deeper insights into a company that can’t often be had through just reading. This is, of course, above and beyond all the financial statement reading and standard due diligence that a prospective investor is expected to do. It refers to a method of conducting due diligence about a company and its investment merits by talking to all kinds of people related to it like customers, vendors, trade associations, competitors and employees (former and current). It’s not that far off from the more modern office equivalent – “watercooler talk”.Īs it relates to investing, the Scuttlebutt Method was coined by Phil Fisher in his seminal book "Common Stocks and Uncommon Profits" (See Recommended Reading). Since sailors exchanged gossip when they gathered at the scuttled butt for a drink of water, scuttlebutt became slang for gossip or rumors. Water for consumption on sailing ships was typically stored in a scuttled butt - a butt (cask) which had been scuttled by making a hole in it so the water could be withdrawn. The origin of the term is related to sailing. Scuttlebutt is a term that generally refers to rumors or gossip. However, I thought it was due time to dig a bit into what scuttlebutt investing involves and why I am so passionate about it. You might have thought that this would have been my first post ever - explaining the Scuttlebutt Method but alas so much to write about and so little time. Scuttlebutt Investor is an homage to the great Phil Fisher – an early GARP (Growth At a Reasonable Price) investor before GARP was even a thing. The first question I usually get when I tell someone the name of my blog is: where did you come up with such a dumb name? And I get it – “Scuttlebutt” isn’t the sexiest name for a website or blog but it is an idea that has resonated with me over the years and to which I am forever indebted.
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