“The need for patience [is necessary] if big profits are to be made from investment. Put another way, it is often easier to tell what will happen to the price of a stock than how much time will elapse before it happens. The other is the inherently deceptive nature of the stock market. Doing what everybody else is doing at the moment, and therefore what you have an almost irresistible urge to do, is often the wrong thing to do at all.” Philip A. Fisher

Legendary investor Philip Fisher was willing to pay more for a stock he felt it had high growth-potential regardless of the fact that it might not be an undervalued company according to value-investing standards. However, Fisher warned against the purchase of promotional companies and falling for the usually manipulated tone of the financial statements.

Philip Fisher is among the most influential investors of all time. His investment principles, introduced six decades ago, are studied and applied by today’s finance professionals. He recorded these principles in Common Stocks and Uncommon Profits, a book considered by investors as a must read when it was first published in 1958.

According to Philip Fisher, investigation was the key to successful investing. And, he used a variety of means to research and deeply analyze a company.

Fisher’s approach to growth stock investing was something he called ‘scuttlebutt’. ‘Scuttlebutt’ is the process of going beyond the financial statements or company disclosures and investigating the internal and external stakeholders of the company to get in-depth information and wider perspective on the business to realize growth potential.

Philip Fisher’s 15-point approach essentially attempts to determine whether a company is in a position to continue to grow sales for several years, has an innovative and visionary management, strong profit margins, effective sales organization and high-quality management. Fisher also argued against over-diversifying and, in his heyday, tended to hold only about 30 stocks.

Fisher recommends investors rigorously analyze and ask probing questions of a company regarding:

• Long-term sales growth potential,
• Competitive edge (moat),
• High management capability and Vision,
• Effective research and development undertaken by the company,
• Strong profit margins, and
• Internal company relations;
• The findings and answers from these questions can help an investor find the right growth stock to keep for the long-run.
• In short, Fisher believed that…“Such a study indicates that the greatest investment reward comes to those who by good luck or good sense find the occasional company that over the years can grow in sales and profits far more than industry as a whole. It further shows that when we believe we have found such a company we had better stick with it for a long period of time. It gives us a strong hint that such companies need not necessarily be young and small. Instead, regardless of size, what really counts is a management having both a determination to attain further important growth and an ability to bring its plans to completion.”

References:

1. https://www.valuewalk.com/philip-fisher-resource-page/
2. https://www.forbes.com/2009/02/23/philip-fisher-growth-personal-finance_philip_fisher.html
3. https://www.investopaper.com/news/best-philip-fischer-quotes