Who Is: Philip Fisher

Photo Credit: Matt Koppenheffer

Photo Credit: Matt Koppenheffer

Philip Fisher is often revered as a pioneer in growth-stock investing. Fisher was an inspiration to Warren Buffett, among many others, but while their styles have some common characteristics, they also differ in many ways.

Early career
Fisher was born in 1907, and reportedly dropped out of the newly created business school at Stanford University in California at the age of 21, to work as a securities analyst in San Francisco. In 1931, at a very troubled time on the stock market, he founded Fisher & Company, a money management business.

After keeping a relatively low profile for much of his career, he wrote his first book, Common Stocks and Uncommon Profits, in 1958. This was the first book on investment to make it onto the New York Times bestseller list.

Investment style
As many investors have found, answers to key investing questions are all too often not found in a company report or convenient database. They are qualitative questions with subjective answers. To some extent they can be answered by attending annual meetings and meeting with the management.

Fisher’s main source of information, though, was a wide network of contacts that he could talk to about these issues. He regarded this sort of direct and unpublished information — what he termed “scuttlebutt” — as an invaluable resource in investment decisions. What do employees think of management? How is the company viewed by its competitors? What new ideas is it working on?

This all goes to the heart of thoroughly understanding the company, and if you spot a good one — and especially a good small company — before the rest of the market, you will do very well. Fisher was operating before the era of Internet discussion boards, but these serve as a very useful way for investors to share firsthand knowledge, with the obvious caveats that not everyone on a discussion board is impartial or truthful.

It’s important to note that once he found a company that met his requirements, he didn’t flinch from paying a high multiple to own a piece of it. His investment horizon, ideally, was forever: “If the job has been correctly done when stock is purchased,” he said, “the time to sell it is almost never.” So finding a company that could sustain exceptional growth over a long period would justify an initially “expensive” purchase.

This policy proved profitable with companies like Motorola, which he bought in 1955 and never sold, and Texas Instruments (NYSE: TXN), which he bought in 1956 long before it went public.

Finding these sorts of companies is not easy, of course. As Fisher lamented, “Great stocks are extremely hard to find. If they weren’t, then everyone would own them.” And for that reason, Fisher saw no real benefit to diversification. His policy was to take the trouble to track down these gems, and then make meaningful investments in them when you find them.