How to pick stocks the Philip Fisher way | Value Research Fisher’s famous 15-point approach and the scuttlebutt method can enable investors to discover quality growth companies with capable management.
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How to pick stocks the Philip Fisher way

Fisher's famous 15-point approach and the scuttlebutt method can enable investors to discover quality growth companies with capable management.

It is very difficult for someone to change his/her investment philosophy. But that's precisely what Warren Buffett and other masters of the game have done under the influence of Philip Fisher. Known as one of the earliest proponents of growth investing, he shot to fame in 1958 following the publication of his book 'Common Stocks and Uncommon Profits'. After dropping out of Stanford Graduate School of Business in 1928, he worked as a securities analyst for a few years before starting his own money management firm Fisher & Company in 1931. He retired in 1999 at the age of 91.

How to pick stocks the Philip Fisher way

Fisher's philosophy hinges on growth with a very long-term investment horizon. His famous 15-point approach (explained in his book) helps investors determine whether a company has capable and honest management, possesses strong innovative capabilities and can continue to grow sales for several years. At the core of this approach lies the scuttlebutt method. Leveraging this method, retail investors can obtain information about a company from various sources, including vendors, customers and former employees, etc. In fact, Philip Fisher used to visit companies in an industry and talk to each one of them about its competitors' strengths and weaknesses in order to get an in-depth picture of their capabilities.

How to pick stocks the Philip Fisher way

So, what can you learn from this great investor? His books can help you learn the art of long-term growth investing. And thanks to the nature of the scuttlebutt method, you would begin to think of stocks as businesses rather than just tradable instruments and inculcate a sense of ownership rather than being a mere speculator. This is an evergreen investment philosophy, especially if you are quite enterprising and think long-term. So, learn from the master and explore the list of companies that we have prepared based on the method.

Filters
In order to get a list of Philip Fisher-type companies, we have applied the following quantitative filters:

  • Positive TTM sales growth
  • 5Y annualised sales growth greater than 5Y industry median
  • TTM net profit margin greater than industry median
  • 5Y median net profit margin greater than 5Y industry median
  • Net profit margin greater than industry median in all 5 years
  • Price to earnings growth (PEG) between 0.1 and 0.5
  • Dividend payout ratio less than 30 per cent

Here is the list of companies that cleared these filters.

Also in the series:

How to pick stocks the Buffett & Munger way

How to pick stocks the Benjamin Graham way

How to pick stocks the Joel Greenblatt way

How to pick stocks the John Neff way

How to pick stocks the John Templeton way

How to pick stocks the Peter Lynch way


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