Knowing that, as established in the first chapter of the book, the investor's goal is to find the incredible companies that will generate outstanding returns, Fisher describes two approaches for achieving this goal: the investor may hire someone to investigate potential companies, or he may follow what Fisher calls "Scuttlebutt".
Fisher strongly recommends the latter approach, as while the first approach sounds reasonable, in practice it does not work out well. For one reason, it takes an enormous amount of skill to find such companies, and those who have such skill will already have top managerial positions that pay well enough such that this venture would not interest them. Furthermore, it's doubtful that companies would allow anyone access to the information that is required to properly determine the company's potential position.
The "Scuttlebutt" method takes advantage of the business grapevine. Gathering a cross-section of opinions from various stakeholder groups of particular aspects of the company under study is immensely useful. Fisher recommends investors speak to competitors, suppliers, customers, researchers, trade associations, employees and former employees.
Fisher recognizes that most investors will have neither the time nor the inclination to go through the process described above. Nevertheless, he stresses that just knowing the relevant sources of information will be useful to the investor, so that at the very least he may ask the right questions of his financial advisor.
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