Philip Fisher’s Investment Philosophies
– Invest for the long term.
– Diversify your portfolio through proper asset allocation.
– Blend passive with active management.
– Know your costs and keep them low.
Philip Fisher’s Investment Principles
1. Buy companies that have disciplined plans for achieving dramatic long-range profit growth and have inherent qualities making it difficult for newcomers to share in that growth.
2. Buy companies when they are out of favour.
3. Hold a stock until either:
(a) there has been a fundamental change in its nature (e.g., big management changes); or
(b) it has grown to a point where it no longer will be growing faster than the economy as a whole.
4. Deemphasize the importance of dividends.
5. Recognise that making some mistakes is an inherent cost of investment. Taking small profits in good investments and letting losses grow in bad ones is a sign of abominable investment judgment.
6. Accept the fact that only a relatively small number of companies are truly outstanding. Therefore, concentrate your funds in the most desirable opportunities. Any holding of over twenty different stocks is a sign of financial incompetence.
7. Never accept blindly whatever may be the dominant current opinion in the financial community. Nor should you reject the prevailing view just for the sake of being contrary.
8. Understand that success greatly depends on a combination of hard work, intelligence and honesty.
Philip Fisher’s 15 Questions when Considering Buying a Business
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 company’s management have a determination to continue to develop products or processes that will still further increase total sales potential when growth potentials of current 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 organisation?
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 methods?
11. Are there other aspects of the business somewhat peculiar to the industry involved that 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 regards to profits?
13. In the foreseeable future, will the growth of the company require sufficient equity financing so that the large number of shares then outstanding will largely cancel the existing benefit from this anticipated growth?
14. Does the company’s 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?
Fisher on why we must never sell good stocks:
“As long as the company behind the common stock maintains the characteristics of an unusually successful enterprise, never sell it. If the company is of a high quality, then selling it is rather foolish at almost any price, because of the scarcity of high-quality investments. What will you do with the proceeds from the sale of a world class company?”