Philip Fisher, the father of growth investing, spent seven decades buying into technology companies. Naturally he regarded research and development as a key factor in the success of a company.
For Fisher it is not simply a matter of looking at the amount that is spent on R&D. It should be a straightforward task to divide the R&D figure by the total sales figure, and thereby work out how much is spent on each dollar of sales. But even here there is a problem, in that there is not a set method for what is included in or excluded from the R&D figures published in company accounts, nor for how companies allocate their spending in this area.
The quality of R&D shows enormous variation, with well-run companies obtaining at least twice as much gain for each research dollar as less well-run companies.
Tech is not all about the tech guys
A technological genius is all very well, but his or her skill has to be managed, and good teamwork is essential. The image of the isolated genius producing new products and processes no longer represents the reality.
Today’s innovations tend to come from teams of highly trained people, each with a different specialty. You may find a chemist working with a solid state physicist, a metallurgist and a mathematician. Their individual skills are only part of the equation.
You also need leaders able to effectively coordinate the work of people of such diverse backgrounds and keep them driving toward a common goal. Indeed, so important is t....To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
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