Philip A Fisher

Investment advisor at his own San Francisco-based firm.

Investment style

Ultra long-term buy-and-hold investor in technology growth stocks.

Profile

After training as an analyst in a San Francisco bank, Phil Fisher started his own investment advisory business in 1931. He has always specialized in the type of firm for which California is best known: innovative technology companies driven by research and development. But he began almost 40 years before the name Silicon Valley was even thought of.

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.

Now in his nineties, he is still working in the same way he has always done. He is 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. But he also has an unconventional and contrarian turn of mind, which helps him to spot value before the crowd.

Long-term returns

Not known.

Biggest success

Fisher acquired a lot of stock in Texas Instruments in 1956, long before it went public in 1970. It was first quoted at around $2.70, and has recently gone as high as $200 - a rise of 7,400% even without dividends. Fisher's own gains have probably been significantly higher, given that he bought the shares privately.

Methods and guidelines

Concentrate your attention and your cash on young growth stocks.

In order to identify and research promising prospects,

read everything you can lay your hands on, from trade journals to brokers' reports

interview those in the know, such as managers and employees, but especially suppliers, customers and competitors, who will be more forthcoming
visit various company sites if you can, and not just the headquarters.
Before you buy, make sure you get satisfactory answers to 15 key questions:

• Does the company have products or services with sufficient market potential to make possible a sizeable increase in sales for at least several years?
• Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?
• How effective are the company's research and development efforts in relation to its size?
• Does the company have an above average sales organization?
• Does the company have a worthwhile profit margin?
• What is the company doing to maintain or improve profit margins?
• Does the company have outstanding labour and personnel relations?
• Does the company have outstanding executive relations?
• Does the company have depth to its management?
• How good are the company's cost analysis and accounting controls?
• 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?
• Does the company have a short-range or a long-range outlook in regard to profits?
• 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?
• Does the management talk freely to investors about its affairs when things are going well, but 'clam up' when troubles and disappointments occur?
• Does the company have a management of unquestionable integrity?

Source: Common Stocks and Uncommon Profits, P Fisher, 1958

There are only ever three reasons to sell:

If you have made a serious mistake in your assessment of the company

If the company no longer passes the 15 tests as clearly as it did before
If you could reinvest your money in another, far more attractive company. But before you do this, you must be very sure of your reasoning.
Key sayings

"I don't want a lot of good investments; I want a few outstanding ones."

"The greatest investment reward comes to those who by good luck or good sense find the occasional company that over the years can grow in sales and profits far more than industry as a whole."

"The business 'grapevine' is a remarkable thing. It is amazing what an accurate picture of the relative points of strength and weakness of each company in an industry can be obtained from a representative cross-section of the opinions of those who in one way or another are concerned with any particular company."

"If the job has been correctly done when a common stock is purchased, the time to sell it is - almost never."

Further information

Fisher outlined his views and methods in the book Common Stocks and Uncommon Profits, first published in 1958. The 1996 edition published by J Wiley also comprises two shorter pieces, 'Conservative Investors Sleep Well' and 'Developing an Investment Philosophy', a highly educational account of his early experiences.

INTEGRATE

Born: San Francisco, California in 1907; Died 2004

Affiliations: •Fisher & Company

Most Famous For: Philip Fisher was one of the most influential investors of all time. His investment philosophies, recorded in his investment classic, "Common Stocks and Uncommon Profits" (1958) are still relevant today and are widely studied and applied by investment professionals. It was the first investment book ever to make the New York Times bestseller list. Fisher's son, Kenneth L. Fisher, wrote a eulogy for his father in his regular column in Forbes magazine (March 11, 2004):

"Among the pioneer, formative thinkers in the growth stock school of investing, he may have been the last professional witnessing the 1929 crash to go on to become a big name. His career spanned 74 years, but was more diverse than growth stock picking. He did early venture capital and private equity, advised chief executives, wrote and taught. He had an impact. For decades, big names in investing claimed Dad as a mentor, role model and inspiration."

Personal Profile

Philip Fisher's career began 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.

Although he began some fifty years before the name Silicon Valley became known, he specialized in innovative companies driven by research and development. He practiced long-term investing, and strove to buy great companies at reasonable prices. He was a very private person, giving few interviews, and was very selective about the clients he took on. He was not well-known to the public until he published his first book in 1958.

Investment Style

Fisher achieved an excellent record during his 70 plus years of money management by investing in well-managed, high-quality growth companies, which he held for the long term. For example, he bought Motorola stock in 1955 and didn't sell it until his death in 2004.

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 included integrity, conservative accounting, accessibility and good long-term outlook, openness to change, excellent financial controls, and good personnel policies.

Important business characteristics would 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.

Philip Fisher searched far and wide for information on a company. A seemingly simplistic tool, what he called "scuttlebutt," or the "business grapevine," was his technique of choice.

He devotes a considerable amount of commentary to this topic in "Common Stocks And Uncommon Profits". 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.

Publications

•"Common Stocks And Uncommon Profits" by Phillip A. Fisher(1958)
•"Conservative Investors Sleep Well" by Phillip A. Fisher (1975)
•"Developing An Investment Philosophy" by Philip A. Fisher (1980)

Quotes

"I don't want a lot of good investments; I want a few outstanding ones."

"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)