Phillip Fisher was one of the most influential investors and authors in the history of finance, and his work has left a lasting legacy in the field of investment. Born in 1907, Fisher pioneered fundamental analysis and the "growth investing" approach, which involves identifying companies with significant growth potential and maintaining those investments over the long term.
Throughout his career, Fisher developed a unique approach to evaluating stocks and selecting companies that possessed sustainable growth characteristics, becoming a benchmark on Wall Street. His influence was so profound that it impacted some of the most successful investors of all time, including Warren Buffett, who incorporated elements of Fisher's philosophy into his own investment approach.
Phillip Fisher's Training and Philosophy
Fisher began his career in financial markets in 1928 and founded his investment firm, Fisher & Company, in 1931. For more than 70 years, Fisher remained active in the market, managing investments for clients and sharing his knowledge. Unlike other investors of the time who focused on quantitative analysis of companies, Fisher adopted a qualitative approach that emphasized the fundamental characteristics of the business and the quality of its management. He believed that successful investing required understanding the essence of the company and its long-term growth potential.
One of the most notable aspects of Fisher's philosophy was his focus on know the companies thoroughly before investing in themThrough a detailed research approach, known as "scuttlebutt," Fisher recommended that investors gather information from sources close to the company, such as suppliers, competitors, and customers, to gain a complete view of the business. This allowed him to gain a competitive advantage by investing in companies that others couldn't adequately evaluate based on financial numbers alone.
“Ordinary Shares and Extraordinary Profits”
Phillip Fisher's most famous book, “Ordinary Shares and Extraordinary Profits” (in English, Common Stocks and Uncommon Profits), published in 1958, is considered one of the essential texts for anyone aspiring to understand and practice long-term investing. In this book, Fisher explains his growth investing philosophy and details the criteria he uses to evaluate and select quality stocks. Although it was published more than six decades ago, its content remains relevant and widely read by investors around the world.
In "Common Stocks and Uncommon Profits," Fisher introduced the concept of 15 key questions an investor should ask about a company before purchasing its stock. These questions addressed aspects such as the company's competitiveness, the longevity of its products, the quality of its management, its capacity for growth, and its return on invested capital. This approach helped investors identify companies with solid and sustainable growth potential, rather than those that simply looked cheap.
Fisher's 15 key questions helped investors determine whether a company had unique growth characteristics. This approach contrasted with that of many investors at the time, who primarily sought out companies with undervalued value without necessarily considering their long-term potential.
Phillip Fisher and Warren Buffett
Warren Buffett, considered one of the most successful investors of all time, was deeply influenced by the ideas of Phillip Fisher. Originally, Buffett followed the philosophy of his mentor Benjamin Graham, who was an advocate of value investing and looked for stocks selling at low prices relative to their intrinsic value. Graham taught that investors should focus on quantitative analysis and buying stocks that were cheap relative to their book value or earnings.
However, in the 1960s, Buffett began to adopt elements of Fisher's growth investing approach. After reading "Common Stocks and Uncommon Profits," Buffett recognized the value of identifying companies with a sustainable competitive advantage and long-term growth potential. This allowed Buffett to shift away from "cheap stocks" and begin focusing on companies with sound, well-managed business models. Through this combination of Graham's value analysis and Fisher's growth approach, Buffett developed an investment strategy that has proven successful and has turned Berkshire Hathaway into one of the world's most important investment firms.
Buffett has publicly stated that "Common Stocks and Uncommon Profits" is one of the few books worth reading in the field of investing, and that Fisher's approach had a significant impact on his way of analyzing companies. In fact, when Buffett invested in companies like Coca-Cola, American Express, and Apple, he was applying Fisher's same principle: looking for companies with enduring competitive advantages and growth potential.
Key Principles of “Common Shares and Extraordinary Profits”
In his book, Phillip Fisher highlights several key principles that can help investors make informed and prudent decisions. Some of the most relevant are:
- Invest in companies with great long-term growth potentialFisher emphasized the importance of seeking companies capable of sustained growth. This requires a deep understanding of the market in which the company operates and its competitive position.
- Evaluate the quality of administrationFisher believed that the quality of management was a crucial factor in a company's long-term success. He recommended that investors research company leaders and evaluate their integrity, their ability to innovate, and their commitment to sustainable growth.
- Know the product and the industryFisher insisted that investors should thoroughly understand the company's products and services and their market demand. To do so, he suggested conducting in-depth research, including obtaining information from external sources such as suppliers, competitors, and customers.
- Finding a competitive advantageSuccessful companies tend to have some form of competitive advantage, whether through unique technology, a strong brand, or a market leadership position. Fisher believed investors should identify and value these advantages.
- Maintain a long-term perspectiveFisher promoted the idea of buying and holding stocks rather than frequent trading. His philosophy was to invest in solid companies and hold those investments for many years, allowing compound growth to do its work.
The Legacy of Phillip Fisher
Phillip Fisher's influence on the investment world remains significant to this day. His growth investing approach and qualitative analysis method have been adopted and adapted by numerous investors, and his legacy lives on through his books and followers of his philosophy.
Companies like Apple, Google, and Amazon, which have shown extraordinary growth in recent decades, exemplify the types of companies Fisher would have identified as investment opportunities due to their competitive advantages and growth potential. In a world where volatility and market fads can disorient investors, Fisher's philosophy of maintaining a long-term perspective and focusing on company quality offers a timeless investment compass.
Conclusion
Phillip Fisher and his book "Common Stocks and Uncommon Profits" established an investment philosophy based on patience, detailed research, and the identification of companies with long-term growth potential. His qualitative approach and emphasis on deeply understanding the essence of companies changed the investment paradigm and led to the creation of a school of thought that has influenced generations of investors, including legendary figures like Warren Buffett.
By focusing on quality and growth, Fisher provided a valuable alternative to the purely quantitative approach to value investing, demonstrating that understanding a company's intangibles can lead to extraordinary long-term results.
Both you and your company can also invest in quality companies.
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