If Benjamin Graham taught the world to buy cheap, Philip Fisher taught it to buy great. Warren Buffett once described himself as "85% Graham and 15% Fisher," and many believe Fisher's share grew over time. In Part 2 of Legendary Investors, we look at the quiet Californian who pioneered growth investing.
Who was Philip Fisher?
Fisher was born in San Francisco in 1907. He studied at Stanford's business school, worked briefly as a securities analyst and then, in 1931 during the Great Depression, started his own investment firm, Fisher & Co. Starting a money management business in the worst market of the century taught him patience.
He managed money for a small group of clients for decades and rarely sought publicity. His fame comes mainly from one book: Common Stocks and Uncommon Profits, published in 1958 and still widely read.
The big idea: a few outstanding companies
Fisher believed the biggest gains come from owning a small number of exceptional companies that can keep growing sales and profits for many years. Instead of buying many cheap stocks and selling when they reach fair value, he wanted to find the rare business that could grow several times larger, and then hold it.
His most famous example is Motorola, which he bought in the 1950s and reportedly held for the rest of his life. He also invested early in Texas Instruments.
Scuttlebutt: research beyond the annual report
Fisher's signature method was "scuttlebutt", an old naval word for gossip. He believed you could learn more about a company by talking to the people around it than by reading its accounts alone. He would speak to:
- Customers, to learn whether they loved the product.
- Suppliers, to judge how the company paid and planned.
- Competitors, who often know a rival's strengths better than anyone.
- Former employees, about culture and management.
- Industry experts and researchers.
Only after this wider picture formed would he meet management. Today an individual investor can do a lighter version: use the product, read customer reviews, listen to earnings calls and follow industry news.
The 15 points, simplified
Fisher listed 15 questions to ask about any company. Grouped together, they cover four themes:
1. Growth potential
- Does the company have products with enough market potential to grow sales for years?
- Is management determined to keep developing new products as current ones mature?
- How effective is its research and development for its size?
2. Sales and margins
- Does it have a strong sales organisation?
- Are profit margins healthy, and is it working to keep or improve them?
3. People and culture
- Does it have good labour and staff relations?
- Is there depth of management, not just one star?
- Does management talk openly to shareholders when things go badly, not only when they go well?
- Is management unquestionably honest?
4. Long-term thinking
- Does the company take a long-range view of profits rather than squeezing every quarter?
- Will growth require so much new share issuance that existing shareholders get diluted?
- Does it have strong cost controls and accounting?
When to sell
Fisher famously said that if the job was done right when a stock was bought, the time to sell is "almost never." He named only three reasons to sell:
- You made a mistake and the company is not what you thought.
- The company no longer meets your criteria, often because management changed or growth ended.
- You found a clearly better opportunity, and you are very sure of it.
He warned against selling just because a stock looked expensive in the short term or because you feared a market fall.
Concentration, with care
Fisher preferred to know a few companies deeply rather than many companies slightly. He was not reckless, though. He suggested owning some different types of growth companies so that one industry problem could not ruin you.
Fisher's lessons for today
- Quality compounds. A business that keeps growing can make up for a slightly high starting price.
- Management matters. Honesty and long-term thinking are worth paying for.
- Do real homework. Go beyond the stock chart and press releases.
- Patience pays. The biggest gains usually come to those who hold through boring and scary years.
The risk in Fisher's approach
Growth investing can go badly wrong when investors pay any price for exciting stories. Fisher's method depends on deep research and honest judgement. Without that, "buy and hold great companies" can become "buy and hold expensive hype."
Fisher died in 2004. His son, Ken Fisher, also became a well-known investor. In Part 3, we meet the man who blended Graham's discipline with Fisher's love of quality: Warren Buffett.
Legendary Investors: the full series
- Part 1: Benjamin Graham
- Part 2: Philip Fisher (you are here)
- Part 3: Warren Buffett
- Part 4: Charlie Munger
- Part 5: John Templeton
- Part 6: Peter Lynch
- Part 7: John Bogle
- Part 8: George Soros
- Part 9: Ray Dalio
- Part 10: Jim Simons
This series is for education only and is not investment advice. Returns, dates and figures are commonly cited historical values and may vary slightly between sources. Past performance does not guarantee future results.
