Phillip fisher

Brief Biography

Phillip Fisher was born in San Francisco, California in 1907. He began his career in 1928 when he dropped out of the newly created Stanford business School to work as a securities analyst with the Anglo-London Bank in San Francisco. He switched to a stock exchange firm for a short time before starting his own money management business as Fisher & Company in 1931. He managed the company's affairs until his retirement in 1999 at the age of 91 and is reported to have made his clients extraordinary investment gains. He was very selective about the clients he took on. He specialized in innovative companies driven by research and development and practiced long-term investing. He bought great companies at reasonable prices. He was a very private person and gave very few interviews. He survived the market crash of 1929 and made his mark with a landmark book, Common Stocks and Uncommon Profits. It was the first investment book ever to make the New York Times bestseller list. He is widely regarded as one of the early seminal thinkers in the evolution of growth stock investing and a strong advocate of buying and holding.

His investment Philosophy

His philosophy was to "always think long term," to "buy what you understand" and to own "not too many stocks.His famous "fifteen points to look for in a common stock" were divided up between two categories: management's qualities and the characteristics of the business. Important qualities for management include integrity, conservative accounting, accessibility and good long-term outlook, openness to change, excellent financial controls and good personnel policies. Important business characteristics include a growth orientation, high profit margins, high return on capital, a commitment to research and development, superior sales organization, leading industry position and proprietary products or services. He searched far and wide for information on a company. A seemingly simplistic tool which he called "scuttlebutt" or the "business grapevine" was his technique of choice. He was superb at networking and used all the contacts he could muster to gather information and perspective on a company. He considered this method of researching a company to be extremely valuable.

The fifteen points to look for in a stock (that is the fifteen important questions to ask before investing in a stock) according to Fisher include the following;

1. Does the company have products or services with sufficient market potential to make possible a sizeable increase in sales for at least several years? 

2. Does the management have a determination to continue to develop products or processes that will further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited? 

3. How effective are the company's research and development efforts in relation to its size? 

4. Does the company have an above average sales organization? 

5. Does the company have a worthwhile profit margin? 

6. What is the company doing to maintain or improve profit margins? 

7. Does the company have outstanding labour and personnel relations? 

8. Does the company have outstanding executive relations? 

9. Does the company have depth to its management? 

10. How good are the company's cost analysis and accounting controls? 

11. Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition? 

12. Does the company have a short-range or a long-range outlook in regard to profits? 

13. In the foreseeable future, will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders' benefit from this anticipated growth? 

14. Does the management talk freely to investors about its affairs when things are going well, but 'clam up' when troubles and disappointments occur? 

15. Does the company have a management of unquestionable integrity?

The important don'ts for investors

According to him, in investing, the actions you take are just as important as the actions you don't take. The following points are what an investor should not do

Don't buy into promotional companies

He believes that when a company is still in the promotional stage , all an investor or anyone  else can do is look at the blueprint and guess what the problems and strong points may be which allows a much greater probability of error in the conclusion reached.

Don't overstress diversification.

Fisher noted that once you start putting your eggs in a multitude of baskets, not all of them end up in attractive places, and it becomes difficult to keep track of all your eggs. Fisher, who owned at most only 30 stocks at any point in his career, had a better solution. Spend time thoroughly researching and understanding a company, and if it clearly meets the 15 points he set forth, you should make a meaningful investment.

Don't follow the crowd.

Following the crowds into investment fads can be dangerous to your financial health. On the flip side, searching in areas the crowd has left behind can be extremely profitable.

Don't fail to consider time as well as price in buying a true growth stock

According to him when the indications are strong that there would be an increase in the price of a certain stock in the nearest future, deciding the time you would buy rather than the price at which you will buy may bring you a stock about to have an extreme further growth at or near the lowest price at which that stock will sell from that time on.

Don't quibble over eighths and quarters.

After extensive research, you've found a company that you think will prosper in the decades ahead, and the stock is currently selling at a reasonable price. Should you delay or forgo your investment to wait for a price a few pennies below the current price? Fisher told the story of a skilled investor who wanted to purchase shares in a particular company whose stock closed that day at $35.50 per share. However, the investor refused to pay more than $35. The stock never again sold at $35 and over the next 25 years, increased in value to more than $500 per share. The investor missed out on a tremendous gain in a vain attempt to save 50 cents per share.

His major deals

He was an extremely logical and methodical man, who only selects companies for purchase after a painstaking process of trawling through trade literature and interviewing managers and competitors. The firms he bought for his clients then were relatively low-tech, such as Dow Chemical or Food Machinery Corporation. Later on, he was one of the first professional investors to recognize the merits of hi-tech firms like Motorola and Texas Instruments when they were starting out. His most famous investment was his purchase of Motorola, a company he bought in 1955 when it was a radio manufacturer and held until his death. He was an early investor in semiconductor giant Texas Instruments TXN, whose market capitalization recently stood at well over $40 billion.

His Publications

"Common Stocks And Uncommon Profits" (1958)

"Conservative Investors Sleep Well" (1975)

"Developing An Investment Philosophy" (1980)