114 of 115 people found the following review helpful:
5.0 out of 5 stars
You can ignore this book, but only at your PERIL!!!!, March 8, 2007
Having been associated with Wall Street for 35 years, I was lucky enough to have been in the same room with Philip Fisher on more than one occasion. He was a completely self-contained man, extremely comfortable in his own skin. He knew who he was, what he was, and what he could be. He possessed zero airs about him. These traits seem to run freely in many MASTER investors, including Warren Buffett.
Many have mentioned that Buffett considers himself to be 85% Benjamin Graham, and 15% Philip Fisher. This needs to be updated. If you spoke with Buffett today, he would tell you that those ratios are distorted, and the reason is Charlie Munger, Warren Buffett's investing partner at Berkshire Hathaway.
Charlie Munger is cut from the same cloth as Philip Fisher. They are growth players, and willing to pay up for a stock. For decades Buffett could NEVER PAY UP for a stock. He wanted them dirt cheap, so cheap in fact that some big plays got away from him forever. I don't know how many years ago, Buffett mentioned in a meeting I attended that he once owned a considerable amount of Disney. It would be a controlling amount in today's market; it got away from him, and tens of billions of dollars in that play alone.
In the old days when Buffett was strictly Graham and Dodd, he could not buy a GROWTH stock. He still cringes at the thought. Munger however taught Buffett to pay up. An example was Flight Safety International for which Buffett paid a previously unheard price-earning ratio. There are people around Buffett who know him well who will tell you that Munger is the superior investor. What you need to know is that sometimes stocks are DIRT CHEAP because they are DIRT, to use a Munger line.
Philip Fisher like Munger is a MASTER INVESTOR worthy of spending whatever time you can spare studying. If you want to walk in the footsteps of a MASTER, you must study the MASTER, and Fisher has a tremendous amount to offer.
I have managed billions of dollars in my lifetime. I am telling you this because you need to know that the SKUTTLEBUTT method that Fisher is famous for is something that anyone can used, starting today. Most of Wall Street research or any research that I have seen over the decades is not worth the paper it is printed on. On more than one occasion I have asked if the paper is soft enough to use for toilet paper.
With the scuttlebutt method, you talk to everyone but the company you are studying. Please allow me to illustrate. If you are thinking of investing in a car company, you start visiting car dealers. You learn the lingo, you read trade periodicals, maybe even a few car magazines, but be careful. Magazines and newspapers are completely jaded in their reporting by how much advertising dollars they receive from certain companies. You didn't know that because no one will ever dare print it.
If a newspaper wants to bury an important story on a company that gives them tremendous advertising dollars, they will run the unfavorable story, but it will be in the Saturday morning edition, which is the least read edition of the week. You need to know these things. I used Scuttlebutt back in the 80's, to accumulate a massive position in Chrysler when it was near bankruptcy. The stock went from $6 to $200 after splits. It isn't hard. You don't need to be a big market player, anybody really can do it.
You do need an inquisitive mind, and I believe an innovative one as well. Fisher was a guy who thought outside the box, and that's why he was immensely rich, as is his son Ken. Philip Fisher is a guy that made a fortune in FMC Corporation, owned it for 30 or more years. He was a ground floor player in Texas Instruments, owned it and made thousands of percent on the stock. He was every bit Buffett's equal, and to Fisher's credit, he gave us the greatest gift of all. He wrote a book, and was open with his readers about how to attain great wealth in the market.
He takes the "Efficient Market Hypothesis" (EMT), and blows it out of the water. His returns and Buffett's are so many standard deviations away from the mean, that EMT can't survive an investigation based on their results.
He gives you a 15-point criteria list to identify the types of companies that meet his screening. He also gives you five don'ts, and then five more to protect you as an investor. What Fisher is really doing is giving you a TEMPLATE to used as an investor. This is what you need. This is no different than going into the Marine Corps, and spending 12 weeks in basic training. Once you're done, you have certain smart behaviors drilled into your psyche so deep that in combat, and investing is combat, you can fall back on these techniques to survive. They become automatic. No matter what investment turns up, you can put it through the filters that have stood the test of time.
In closing, I would like to say one more thing about the Scuttlebutt technique. Recently, I had to make a decision to invest a considerable amount of money in the auto sector. One of the people I consulted with, is a legend in his 90's, who is the greatest mutual fund investor of the 20th century, probably worth over a billion dollars. He says to me in passing, do you know whom Toyota, the greatest car company in the world fears? The answer is the South Korean car companies. That my friends is worth a fortune, and is a 20 year stock play that Philip Fisher would have envied.
Richard Stoyeck
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68 of 70 people found the following review helpful:
4.0 out of 5 stars
Picking stocks by analysing businesses not accounts, May 5, 1997
By A Customer
This review is from: Common Stocks and Uncommon Profits and Other Writings (Wiley Investment Classics) (Paperback)
When you have read Benjamin Graham analysing current ratios and balance sheets until you have decided that stock picking can be done by computer then (and only then) is it time to read Phillip Fisher.
Phillip Fisher searches for "growth stocks", companies with superlative management (superior sales force, superior research and development, clear focus on the business) and he holds their stocks FOREVER.
You can read this book and find not a single substantive mention of balance sheets, solvency, current ratios or any of the other things that most seasoned stock pickers rely on. Instead you find tips for analysing the scuttlebutt that you hear about a company and for testing whether management cuts the mustard. Thirteen or so of the "Fifteen Points" in the second chapter are worth the purchase price of the book and more.
These points summarise as:
* The management are technical geniuses.
* The management know how to milk the existing business, and
* The management resist the institutional imperative.
Unlike Phillip Fisher however, I am not sure the management need to be technical geniuses. Indeed Phillip Fisher's notion of what constitutes a growth stock is quite narrow. He is almost obsessive about research and development. New products are to him the major determinant of growth. He would never have picked Coca-Cola or McDonalds as growth stocks because their product is not technically innovative. Yet a reader of Phillip Fisher may have picked these stocks. They pass the bulk of Fisher's fifteen points with flying colours. Just making hamburgers is not making Silicon chips.
If you could combine Fisher's analysis with Graham and purchase these stocks at reasonable prices you might have even done well. (Incidently I am a Dow disbeliever from Australia and I still think McDonalds is reasonably priced.)
Certainly Fisher would not allow you to hold McDonalds and Coke above a well run techno company. Fisher regards techno stocks with a sort of awe. And regards anybody that holds more than twenty stocks as financially incompetent. [I agree with him on the latter point, and hence hold a small number of non-techno companies, which kind of suits a technophope like me.]
Fisher would have you purchasing Intel at $150, something which I am finding it increasingly difficult to justify (though I have been wrong on that stock before). Intel passes ALL of Fisher's fifteen points. Value does not play a part in Fisher's Analysis. He pays lip service once or twice, but there is precious little discussion on how to pick value. And that is where I think the book falls down.
This is actually quite a limited failing. There are two ways to proceed with Fisher. One: Look for businesses that pass Phillip Fisher's tests. perhaps thirteen of the fifteen points is adequate. Then put through the second filter of "are they crazy on a Benjamin Graham analysis". This will make sure that you do not pay too much for a good business.
Alternatively Benjamin Graham filter stocks. Get the listing down to say 200 or so that are not too expensive (particularly vis earnings rather than assets). Then put them through the Phillip Fisher filter. Buy the ones that pass best. This way you will not be tempted to buy a bad business just because its cheap.
I tend to operate using the latter method. However I would never have found McDonalds that way. So maybe I should do a bit of both.
Cheers and good hunting.
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