Word
Gems
What is a
man but the sum of his thoughts?
Wealth
& Economics:
- Philip A.
Fisher
- 1907-2004
Forbes magazine
Kenneth L. Fisher, 04.26.04
- "In your bones believe in capitalism and its basic
ability, despite recessions and scandals, to better the human condition."
Phillip A. Fisher died Mar. 11 at 96 from old age. He was a great man. Not in his
last years, ravaged by dementia. Then he was just a little old man. But he was my little
old man. I will love him, forever! 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, inspiration or whatever.
His first book, Common Stocks and Uncommon Profits,
appeared in 1958. It was the first investment book ever to make the New York Times
bestseller list. It's still in print at Wiley.
Phil Fisher was one of only three people ever to teach
the investment course at Stanford's Graduate School of Business. He taught Jack McDonald,
the course's current professor. For 40 years Jack has seen to it that you can't get past
that class without reading Phil Fisher. Dad last lectured at Stanford for Jack four years
ago. He had a knack for getting great minds to think their own thoughts -- but bigger than
they would have conceived otherwise on their own. Many disciples described this experience
to me.
People presume I learned lots about stocks from him. Not
really! He got me started and then I fashioned my own notions, as did everyone else he
influenced. Much more important in making me who I am were his early 1950s bedtime
stories. He conceived stunning adventure tales of pirates, explorers, kings and crooks.
The fictional hero was Jerry Clerenden. I couldn't fathom this at the time but I realized
later that this character was created as the person Dad wanted me to be. His stories drove
me to dream bigger visions than most children are allowed.
He was small, slight, almost gaunt, timid, forever
fretful. But great minds drew insights out of him like water from a well.
His views are in his writings and those of others. I won't
repeat. What remains unsaid? What would he think now if he were alive and in his right
mind?
- First, always think long term. A
short-term horizon, if it is relevant at all, is a mere tactical tool to get to your
long-term future. Thinking long term usually goes hand in hand with a low turnover of a
portfolio. My father bought Motorola in 1955, when its main attraction was radio systems.
He still owned it at his death.
- Next, every single month read Phil
Fisher's favorite poem, Rudyard Kipling's oft-quoted "If" ...
- In your bones believe in capitalism
and its basic ability, despite recessions and scandals, to better the human condition.
From that belief you can conclude that, over the long term, the stock market works. It is
better to come to this conclusion from faith than from studying a column of statistics.
- Buy what you understand. You can
hear Peter Lynch in that. And not too many stocks. You hear Warren Buffett in that. In his
prime, Dad owned about 30 stocks. And diversify into different types, and not only your
favorite types, so you have ones that work when your favorites fail.
Don't try to be Phil Fisher. Or Warren Buffett or Peter Lynch or
anyone else. Be yourself, but be more energetic and imaginative than you thought you could
be. Dream bigger.
I remember what my father said eight years ago to James W.
Michaels, then the editor of this magazine: "What are you doing
your competitors aren't doing yet?" At the time Jim Michaels had been in the
job for 35 years, but he was no less imaginative than he had been at the start.
Try posing that question about some cherished company in your
portfolio. What is the management doing that the competition is not doing? Great
managements live the answer and in the process create great stocks.
Ignore the long-term doomsters. The future is just
beginning and will be awesome. My father would say technology offers society a bounty in
the decades ahead that is vastly underestimated even by technologists. Still, it is as powerful to invest in companies adopting technology as those
creating it. With either, he would urge buying stocks of firms he called
"fundamental." You don't buy assets or earnings but the
overall endeavor...
Kenneth L. Fisher is a Woodside, CA-based money
manager.
*********************************************
By Bill Mann
It's with sadness that we note that investing legend Philip A. Fisher died this past
month at the age of 96. We had not seen it reported anywhere until Fisher's son, Kenneth,
eulogized his father in his regular column in Forbes.
Fisher was an investment manager of the type that would never have been able to
flourish in the brokerage industry's activity-driven model. Fisher believed in long-term
investing, in buying great companies at good prices, and then thumbing his nose at the
taxman as he held, and held, and held. Fisher gave very few interviews, was extremely
choosy about his clients, and would not have been well known to the public but for his
writings, most notably Common Stocks and Uncommon Profits and Conservative
Investors Sleep Well. Fisher's most famous investment was his purchase of Motorola,
a company he bought in 1955 when it was a radio manufacturer and held until his death last
month. If you can bring up a chart on Motorola that runs 50 years, you'll see that
Fisher's returns on this one investment were sufficient to make success of any investment
career.
Fisher's stock-in-trade was the discipline to thoroughly understand a business before
and after he bought it. His form of long-term investing was not the bastardized version
that became the vogue in the 1990s. Fisher was no passive investor who used the long-term
buy-and-hold mantle to avoid paying attention to his investments. Fisher was always
willing to sell if he noted a negative change in the company's prospects, and, through
painstaking attention to detail, he was generally well ahead of the crowd in ferreting out
potential problems.
I own two copies of Common Stocks and Uncommon Profits. The first is dog-eared
and highlighted, the second was a gift from an extremely generous longtime friend of The
Motley Fool. It is signed by Mr. Fisher, and it is a prized possession.
Herewith are Fisher's "15 Points to Look for in a Common Stock," followed by
"Five Don'ts for Investors." In these questions, without even seeing the
supporting text, you'll see traits in many great companies, such as Pfizer, Stryker,
Abercrombie & Fitch, Procter & Gamble, Costco, United
Technologies, and others. You'll also see some things that lesser companies don't do
well.
I can't think of a better tribute except to urge you to read Fisher's "15
Points" and "Five Don'ts" and their supporting documentation, in the
original. You're guaranteed to learn something great every time you read Fisher's gift to
investors.
15 Points to Look for in a Common Stock
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 labor 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 will be in
relation to its competition?
Does the company have a short-range or 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 or disappointments occur?
Does the company have a management of unquestionable integrity? Five Don'ts for
Investors
Don't buy into promotional companies.
Don't ignore a good stock just because it is traded "over-the-counter."
Don't buy a stock just because you like the "tone" of its annual report.
Don't assume that the high price at which a stock may be selling in relation to its
earnings is necessarily an indication that further growth in those earnings has largely
been already discounted in the price.
Don't quibble over eighths and quarters. Rest well, Phil Fisher.
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