Phil Fisher Developing An Investment Philosophy Flashcards
What does fisher and co. Expect of management
Implement long range policy with superior day to day tasks
Of business operation
Characteristics that Fisher and Company Invests in
1) management fosters increasing sales and profits
2 invest in very small number of companies (mainly manufacturing companies)
3 companies should have small risk relative to growth involved
What is the most important aspect for a business to have over excellent manufacturing and sales force .
The ability to appraise the changing needs and desires of
customers
Reading the printed financial records of a financial company
Is never enough to justify an investment
You must also gain familiarity with the company’s affairs
When you go contrary to the general trend of thought of investment thinking
You must be very sure you are right
3 year rule
Clients shouldn’t judge your investments for 3 years
If you have not produced worthwhile investments for them in 3
Years they should fire you
What is the most important long range problem facing your company?
Great question to ask company management
Wise executives statement: never promote someone who hasn’t made some bade mistakes
Because if you do, you are promoting someone who has never
done anything
If you can’t do a thing better than others are doing it…
Don’t do it at all
Good fortune can breed laxness
Mistakes allow you to learn more
Realize the limitations of your knowledge
Best to stick to the sectors and experience you know well
Long term vs. short term changes
Much higher probability in being wrong predicting short term
changes compared to Longterm changes in stock price
Pensions funds and profit sharing funds: dividends, growth companies
Won’t invest unless company pays dividends, because dividends
Are tax free for them
As a result growth companies issue small dividends to attract
Investment
What does phil fisher characterize as the greatest opportunities for investment?
Situations that were extremely attractive but undervalued
Because the financial community had misjudged the situation
Phil fisher on efficient market theory
Prices aren’t efficient for the diligent, knowledgeable, long
Term investor
Summary of fishers philosophy: 8 points
1 buy companies with disciplined plans of long term growth
2 buy companies when they’re out of favor
3 hold stock until management weakens, it can’t grow faster
Than the averages
4 deemphasize dividends
5 making mistakes and learning how to not repeat them is
Essential
6 relatively small numbers of truly outstanding companies
Can be bought at attractive prices, must buy when prices
Are attractive
7 essential for management to have moral courage to act
Opposite to financial crows when their judgement tells them
They are right
8 handling stocks depends on intelligence, hard work and honesty
Willingness to take small losses in some stocks and let profits grow bigger and bigger in more promising stocks is a sign of what?
Sign of good investment management
Taking small profits in good investments and letting losses grow in bad ones is…
A sign of abominable investment judgement
Profits should never be taken for…
Satisfaction of taking it
How many stocks does phil fisher recommend owning for the competent individual investor?
10 to 12
Contrarians
You should never be contrary for the sake of being contrary
Must have a fundamental reason
What does sustained success require?
Skill and consistent application of sound principles
Comparatively low break even
Essential for a firm to survive a depressed market and increase
Position when weaker competitors are driven out
Management and participatory programs
Work well and are good source of ideas for company management
Business characteristic: Important for investor safety
Favorable profit to sales ratios and turnover rates
High margins
Attract competition which erodes profit opportunities
Best way to mute competition is operate so efficiently
No incentives are left to the potential entrant
What are two avenues for industry leadership, why?
1 technology
2 developing a consumer franchise
Sound investment if they have strong ability to defend established
Markets against new competitors
