Another legendary titan in the investing arena was a man by the name of Philip Fisher. By many he is considered to be the founding father of high growth investing. His book Common Stock and Uncommon Profits published in 1958 propelled this highly intelligent investor into the limelight.
As proof to his prowess even Warren Buffet described himself as "85% Graham (Benjamin) and 15% Fisher".
Quick Facts
- Life: 1907 – 2004
- Business: Fisher & Co. (Founded 1931)
- Father of money manager billionaire Ken Fisher
- Common Stock and Uncommon Profits was the first investment book to make the New York Times bestseller list. It also became standard reading at the Stanford’s Graduate School of Business.
Personal Life
Philip Fisher spent the majority of his life in the San Francisco Bay area of California. His father was a medical doctor. At the extremely young age of 15, Philip Fisher entered university. Some five years later in the year 1927, he enrolled with Stanford University in their new Graduate School of Business program. Less than a year into his studies he took a leave to work as a statistician at the Anglo-London and the Paris National Bank. From there he climbed to the head of his department. From this vaulted position he watched perhaps the worst crash in mankind’s history.
Later, in 1932 he founded his own company called Fisher & Co. which he worked tirelessly at until his retirement in 1999.
Although he is well known for his growth investing skills, he should also be noted as one of the earliest known investors that looked to qualitative aspects in addition to an increasing bottom line.
Investment Acumen
To call Philip Fisher and long term investor would be an understatement. If he never had to sell he would be perfectly happy. The goal of Fisher’s investment strategy was to find long term growth stocks of high quality. To this end he published 15 different criteria to look for.
The summations of those criteria are:
- Consistently strong profits
- Steady sales growth
- Growth greater than industry standard
- Little or no dividends
- Reasonable price compared to growth potential
Perhaps his investment prowess could best be illustrated with a sample trade of his. In 1956 he helped a client invest in Texas Instruments. Keep in mind that this was before a publicly traded company. Trying to adjust for such factors as inflation, he could have bagged a potential 7,400% gain. Seeing as the transaction took place years before the company went public, it is possible he made much more than this. Seed shares are often quite a bit cheaper due to the reduced liquidity of not being on an exchange.
The Scuttlebutt Approach
Philip Fisher believed that a certain set of information was vital before investing with a company. But how would one acquire such knowledge? Not by pouring over a large list of figures and numbers but by using the scuttlebutt approach. What is a scuttlebutt?
The word scuttlebutt refers to a frank, although often malicious report on human behavior. If you want to know how well a company runs… do not read the corporate handout. You would phone and interview different members, talk to the competition and so forth. This is exactly what Philip Fisher would do.
He would tap into his grapevine of business executives, talk to the competition, suppliers, former employees, and customers of those related to the company he was interested in investing with. Philip Fisher would hold court as he cross-examined the different individuals painting a picture with each brushstroke as to what the company really was, and how the management worked. He continued to cross-examine until he could find out at least half of his criteria. If he was stonewalled and couldn’t find the information, he would move on to a company he could assess.
This Scuttlebutt approach proved highly successful and a trademark of this investment icon.
When to Sell
Interestingly, Fisher had a different style to selling his assets. They needed to meet one of three criteria before liquidating. The first was if the original purchase was a mistake. This was highly undesirable and one would sell to cover the error.
The second was if the stock changed in valuations from the necessary criteria. The third was if limited money was on hand and the sale of one lesser stock was needed to finance the sale of a more attractive stock.
As you can see, the investment method did not necessarily use profit targets that short term investors would typically use. Instead, this could be viewed more as a fundamental stop loss instead of a technical price based one.
Success of Philip Fisher
Success is often measured by the legacy left behind. In this respect, Philip Fisher was extremely successful leaving us with his high growth investment techniques for long term investing. As proof of the viability of his strategy he purchased shares of Motorola in 1955 and held them until his death in 2004 at age 96. The shares went up over 20 times while the markets only experienced a gain roughly one-third that much.
Publications Written
- "Common Stocks And Uncommon Profits" by Philip A. Fisher(1958)
- "Conservative Investors Sleep Well" by Philip A. Fisher (1975)
- "Developing An Investment Philosophy" by Philip A. Fisher (1980)
Philip Fisher Quotes
- "I don’t want a lot of good investments; I want a few outstanding ones. If the job has been correctly done when a common stock is purchased, the time to sell it is almost never."
- "The stock market is filled with individuals who know the price of everything, but the value of nothing"
- "I remember my sense of shock some half-dozen years ago when I read a [stock] recommendation to sell shares of a company . . . The recommendation was not based on any long-term fundamentals. Rather, it was that over the next six months the funds could be employed more profitably elsewhere."
- "I sought out Phil Fisher after reading his "Common Stocks and Uncommon Profits". When I met him, I was impressed by the man and his ideas. A thorough understanding of a business, by using Phil's techniques … enables one to make intelligent investment commitments." (Warren Buffett)