Customer Reviews

Developing an Investment Philosophy

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If you buy "Common Stocks and Uncommon Profits and Other Writings" published by Wiley Investment Classics, you will find that the 'Other Writings' are the full text of this book, "Developing an Investment Philosophy" and the full text of his other popular book "Conservative Investors Sleep Well".

This book contains good information, but the best bargain is to buy just the one book.

Let me first give the obligatory warning that you can get the entire text of this 47-page "book" as part of "Common Stocks and Uncommon Profits and Other Writings" (itself 271 pages in length). To be fair to the work itself, I don't think you can get a more concise and clear description of growth investing than this monograph, which was published in 1980, when it is remarkable to recall that there had been an "unfortunate trend of recent years away from common stock investing".

There have been two prominent pioneers in the growth-investing field from its beginnings in the 1950s, T. Rowe Price and Philip A. Fisher. However, to my knowledge, Price did not write publicly about his methods. Fisher has, in an excellent manner.

Fisher interestingly commends the alternative school of investment, value investing, personified by Benjamin O. Graham. I think Fisher makes a good case that an excellent growth investor can achieve better results under the right conditions than an excellent value investor (Fisher quotes Shakespeare: "There is a tide in the affairs of men which, taken at the flood, leads on to fortune"). By definition, Fisher suggests that there can be few truly great growth investors in the universe at any one time, because [p. 30] "companies with truly unusual prospects for appreciation are quite hard to find for there are not too many of them." Fisher's work also gives the impression that growth investors need to operate at a particularly high-Watt level of intensity that perhaps few can match. In fact, it seems that growth investors often need to know more about an industry's and company's prospects than the CEOs themselves.

For those that are thinking of picking up Fisher's methodology and storming into the world of growth stocks, let me offer a few words of caution. First, Fisher valued highly the honesty of the managements that he quizzed about their firms' prospects: [p.17] "...the kind of honesty that caused [the company manager] not to conceal repeated bad news that could not fail to be embarrassing for him to tell. He saw to it that those interested in his company understood all the unfavorable aspects of what was happening, and not just the favorable potentials." In our age where most corporate managements are "control freaks" about their company images, true honesty seems hard to find. Secondly, during the first half of Fisher's career, particularly in the 1950s, there existed a whole class of institutional investors who as a matter of policy did not invest in growth stocks. As they said of Motorola in those days, [p.18] "...this was not the type of company on which they spent time; therefore they had no opinion of it." This is not true in our day. Millions of investors, large and small, are looking for great growth companies. To the extent that you find one, it may be too richly priced for your portfolio's health.

its hard to find so much experience (over 50 years) of a great mind in less than 50 pages.