Phil Fisher: Growth Investing Pioneer | Generated by AI
Phil Fisher: The Father of Growth Investing and Warren Buffett’s Mentor
Philip Arthur Fisher (1907–2004) was a pioneering American investor and author best known for his book Common Stocks and Uncommon Profits (1958), which laid the foundation for modern growth investing. He emphasized qualitative analysis—focusing on a company’s management, innovation, and competitive edge—over quantitative metrics like price-earnings ratios. Fisher advocated for long-term ownership of a small number of exceptional companies, using his “scuttlebutt” technique: gathering insights by informally interviewing employees, customers, suppliers, and competitors to assess a business’s true potential.
Warren Buffett has repeatedly credited Fisher as a major influence, calling his book “one of the great investment books of all time.” Buffett blended Fisher’s growth-oriented approach with Benjamin Graham’s value principles, shifting toward “wonderful companies at fair prices” rather than just “fair companies at wonderful prices.” Buffett even recommended Fisher’s work in his shareholder letters and held stocks like Motorola (a Fisher favorite) for decades.
Core Investment Ideas
Fisher’s philosophy centered on identifying “outstanding” companies with sustainable growth potential, holding them through market volatility, and avoiding over-diversification. He believed most investors fail by chasing short-term trends or spreading bets too thin. Key tenets include:
- Focus on Quality Over Quantity: Invest in a handful (ideally 8–12) of truly superior businesses rather than dozens of mediocre ones. Diversification is for those who don’t know what they’re doing.
- Long-Term Horizon: Buy and hold winners for years or decades; the best profits come from compounding growth, not trading.
- Qualitative Due Diligence: Use scuttlebutt to evaluate intangibles like management integrity, employee relations, and innovation culture—factors that drive enduring success.
- Growth at Reasonable Prices: Seek companies growing sales and profits well above industry averages (at least 10% annually), but don’t overpay if the trajectory justifies it.
- Management Matters Most: Prioritize ethical, visionary leaders with “skin in the game” who admit mistakes, plan for succession, and align with shareholders.
His famous 15 Points Checklist from Common Stocks and Uncommon Profits provides a framework for spotting these gems. Here’s a concise summary:
- Does the company have products/services with sufficient market potential for above-average growth for years?
- Is management determined to develop profitable new products/services to sustain growth?
- How effective is the company’s research and development (relative to its size)?
- Does the company have an above-average sales organization?
- Does the company have a worthwhile profit margin?
- What is management doing to maintain or improve profit margins?
- Does the company have outstanding labor and personnel relations?
- Does the company have outstanding executive relations?
- Does the management have depth (i.e., a strong bench of talent)?
- How good are the company’s cost analysis and accounting controls?
- Are there any important patents or other factors giving the company a valuable competitive advantage?
- Does the management have a long-range outlook, avoiding short-term sacrifices for gains?
- Does the company have a management of unquestionable integrity?
(Note: Fisher originally listed 15, but points 13–15 emphasize avoiding shareholder dilution, admitting mistakes, and ensuring integrity.)
Key Quotes from Phil Fisher
Fisher’s writing is pithy and timeless, often warning against common pitfalls like impatience and herd mentality. Here are 10 standout ones:
- “The stock market is filled with individuals who know the price of everything, but the value of nothing.”
- “I don’t want a lot of good investments; I want a few outstanding ones.”
- “The best time to sell a stock is almost never.”
- “The greatest investment reward comes to those who… find the occasional company that over the years can grow in sales and profits far more than industry as a whole.”
- “More money has probably been lost by investors holding a stock they really did not want until they could ‘at least come out even’ than from any other single reason.”
- “Investors have been so oversold on diversification that fear of having too many eggs in one basket has caused them to put far too little into companies they thoroughly know.”
- “The stock investor is neither right nor wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.”
- “Finding the really outstanding companies and staying with them through all the fluctuations of a gyrating market proved far more profitable… than trying to buy them cheap and sell them dear.”
- “Patience is not just a virtue; it’s a vital ingredient of success in investing.”
- “The greatest investment risks are the ones you take without knowing what you’re doing.”
These ideas and words continue to shape investors like Buffett, emphasizing discipline, curiosity, and conviction over speculation.
References
- Growth Investing with Philip Fisher
- 19 Best Philip Fisher Quotes On Investing
- 16 Philip Fisher Quotes on Investing
- How Warren Buffett was influenced by Philip Fisher