Philip Fisher was a pioneer in growth stock investing and one of the most influential investors of all time. Even Warren Buffett credits Fisher by saying, “I’m 85% Graham and 15% Fisher.” Considering that Buffett puts Graham on a pedestal and says there isn’t even a second place, that says a lot about Fisher’s influence.
Working on the west coast in northern California put Fisher in contact with new, innovative businesses in the early stage of their development. He attended Stanford Business School and also worked in San Francisco. An excellent networker, he loved to use the “scuttlebutt” research method where he would talk with the business owners and ask them questions to find out what’s working and which businesses are really growing.
Investment Strategy
Fisher’s seminal work, Common Stocks and Uncommon Profits (1958), outlines his investment strategy. He realized early on that companies growing at high rates would over time produce the highest investment returns. Thus he focused not on simple arbitrage or undervalued established companies like Warren Buffett and Benjamin Graham; instead he bought strong businesses in developing industries including high tech (which Buffett and Graham avoided).
What to Buy
Philip Fisher’s famous “fifteen points to look for in a common stock” summarized below can be put into two categories:
Business Characteristics
- Is the market sizable enough to sustain long-term growth?
- Are the profit margins sizable?
- Will high profit margins extend into the future?
- What are the clues the specific industry gives the investor to the company’s true performance?
- Can the business grow without diluting shares, i.e. through earnings or borrowing?
Management Qualities
- Is management committed to long-term research and development?
- Is the research and development staff efficient and effective?
- Is the sales staff above average?
- Are employees engaged in the company and with management?
- Are the executives outstanding and compensated on returns?
- Are there multiple high-quality senior executives?
- Are the accounting and cost controls better than average?
- Does management prioritize long-term profits over short-term profits?
- Does management talk truthfully about both the good and bad news?
- Is management of unquestionable integrity?
When to Buy
While a growth stock investor, Fisher still wanted a good deal and was willing to wait until prices of high-flying growth companies were lower. His determination for when to buy is summed up as “growth at a reasonable price” or GARP.
When to Sell
Fisher favored very long-term holding periods to capitalize on the growth of the industry and the business together. He said the best time to sell a stock was “almost never.”
Examples
Motorola
Fisher bought into this technology hardware business in 1955 and his shares were not sold until his death in 2004. The company continued to innovate through the years, which kept profits growing for the business.
Fisher, while an author of multiple books, isn’t as quotable as Warren Buffett because Fisher was extremely private and avoided the media. Thus Fisher has fewer well-known quotes compared to Buffett.
Summary
Philip Fisher’s guiding investment philosophy is summarized as: buy at a reasonable price and hold for the long term just a few outstanding businesses in growing industries.
Philip Fisher amassed a personal fortune and influenced many successful investors. He worked into his 90’s before retiring. His son, Kenneth Fisher is a billionaire who founded his own investment management company.
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