Who Was Philip Fisher?
Philip Fisher (1907-2004) was a widely acclaimed investor and author, known for writing the book Common Stocks and Uncommon Profits. He is believed to have had a profound influence on Warren Buffett.
His son Kenneth Fisher is also a renowned investor, having founded his firm, Fisher Investments, in 1979 that follows his father's philosophy.
- Philip Fisher was a 20th-century American investor who authored the book Common Stocks and Uncommon Profits and founded his own investment firm, Fisher & Co., in 1931.
- Fisher was among the first long-term investors to recognize a stock's growth potential based on fundamental analysis, which also has an impact on Warren Buffett.
- Philip's son, Ken Fisher founded the renowned investment management firm Fisher Investments in 1979.
Understanding Philip Fisher
Philip Fisher has had a major influence on modern investment theory and is credited with the idea of analyzing stocks based on their growth potential using fundamental analysis. Common Stocks and Uncommon Profits teaches investors to analyze the quality of a business and its ability to produce profits. First published in the 1950s, Fisher's lessons are just as applicable today, more than a half-century later.
Fisher dropped out of the newly created Stanford Graduate School of Business in 1928, later returning to be one of only three people to teach the investment course there and working as a securities analyst for the Anglo-London Bank in San Francisco. He switched to a stock exchange member firm for a short time before starting his own money management company, Fisher & Co., in 1931.
Philip Fisher’s Investment Philosophy
Fisher's investment philosophy was simple on its face: Purchase a concentrated portfolio of companies with compelling growth prospects that you understand very well and hold them for a long time. He was famously quoted as saying the best time to sell a stock is “almost never.” His most famous stock pick was Motorola, which he purchased in 1955 and held until his death.
Fisher recommended targeting businesses for investment that had growth orientation, high profit margins, high return on capital, a commitment to research and development, a superior sales organization, a leading industry position, and proprietary products or services. He was famous for the depth of his research on companies with which he would invest. He relied on personal connections (what he called the “business grapevine”) and conversation to learn about businesses before buying stock. His first and most important book, Common Stocks and Uncommon Profits, published in 1958, devotes careful attention to this concept of networking and gathering information via business contacts.
Philip Fisher’s Belief in Small-Cap Growth Stocks
Fisher divided the universe of growth stocks into large and small companies. On one end of the spectrum are large, financially strong companies with solid growth prospects, which during his time included IBM, Dow Chemical, and DuPont, all of which increased in share price fivefold in the 10-year period from 1946 to 1956.
Although such returns were enviable, Fisher was more interested in the big returns that could be found in "small and frequently young companies…[with] products that might bring a sensational future." Of these companies, Fisher wrote, "the young growth stock offers by far the greatest possibility of gain. Sometimes this can mount up to several thousand percent in a decade." Fisher believed that all else being equal, investors should concentrate their efforts on uncovering young companies with outstanding growth prospects.