Fisher’s investment philosophy had been summarized in one sentence as “Purchase and hold for the long term a concentrated portfolio of outstanding companies with compelling growth prospects that you understand very well.”
Fisher had influenced many investors with his investment philosophy. Even the legendary investor Warren Buffett has said on some occasions that “he is 85% Graham, and 15% Fisher.” I may write a little on Graham some other time, but for the time being, let’s focus on Fisher.
According to his son, Fisher's best advice was to "always think long term," to "buy what you understand," and to "own not too many stocks."
Stock-picking was so vital in Fisher’s investment philosophy, and hence, he had created a solid stock-picking criteria set.
After having read Fisher’s lenghty stock-picking criteria set, I have somewhat simplified and revised them in an effort to internalize his perspective. Then, I thought it might be helpful to share this revised set in my blog.
So, here is my revised version of Fisher’s stock-picking rules. In order to qualify for investing for a long-run, a company should have:
- Products with sizable sales increase potential in time.
- Timely new product launch orientation (plus an efficient and effective R&D).
- Outstanding sales organization.
- Brilliant employees and management, state-of-the-art management tools, adequate compensation.
- Worthwhile and foreseeable profit margins (plus an orientation towards maintaining/improving the margins).
- Well-designed cost traction tools and accounting controls (much easier to find the deficient ones).
- Superiority against its rivals (requires an understanding of the factors that determine success in the industry).
- Sufficient cash position or borrowing capacity to fund growth.