Invest Like Philip Fisher: 15 Steps To Success

Meet the trailblazer of growth investing, the one and only Philip Fisher.

His secret sauce? A 15-step playbook that unfailingly pinpointed the crème de la crème of growth companies.

Today, I’m handing you the keys to this treasure trove of wisdom.

Let’s talk about Philip Fisher, the guy who turned heads in the investment world. Ring a bell?

Remember Motorola? Yeah, that one. Back in ’55, Fisher snagged it and hung on until he passed the torch in 2004. A masterclass in riding the winners to the moon.

Ever heard of the ‘scuttlebutt‘ method? Guess who gave birth to that gem? Yep, Fisher again. Peter Lynch? A huge fan.

Scuttlebutt isn’t some fancy sailor’s lingo. It’s Fisher’s brainchild, a method where you roll up your sleeves and dive deep into a company. Chat with customers, sniff around competitors, have coffee with current and former employees – the whole shebang.

And then, there’s that shining endorsement from the Oracle of Omaha himself, Warren Buffett. He’s been known to toss around compliments, but he doesn’t throw ’em around like confetti. He hailed Fisher’s book, “Common Stocks and Uncommon Profits,” as one of the holy grails of investing reads.

“I am an eager reader of whatever Philip Fisher has to say. And I recommend him to you.”

— Warren Buffett

If the legendary Warren Buffett gives Fisher a nod, shouldn’t that grab your attention?

⬇️ The 15-Step Mastery ⬇️

Now, let’s plunge headfirst into Philip Fisher’s signature investment playbook.

His 15-step dance routine, executed to perfection, unveiled the true gems in the world of growth companies.

1. Optimal sales growth

Fisher’s masterstroke: The harmony between stock prices and a company’s inner worth over the long haul. How’s that achieved?

Simple – scout for companies that fuel their revenue with style (we’re talking at least a 5% annual growth spurt) for not just a few spins, but potentially over decades.

After all, this investment tango is all about companies that not only dance in the present but waltz gracefully into the future.

2. A long pipeline of new products

In Fisher’s world, innovation reigns supreme, and stagnation is a four-letter word. Investing wisdom 101: R&D is your sidekick, your partner-in-growth.

Stagnancy? Oh no, that’s the red carpet to retreat. Instead, put your chips on the table of Research and Development. It’s the gateway for companies to outfox competitors and continue that enchanting growth rhythm.

Need proof? Cast your eyes on Amazon, the online book haven turned global juggernaut. Or Netflix, once a humble DVD mail-order setup, now an entertainment behemoth. They didn’t stand still; they pirouetted into the future.

3. Effective Research & Development

Is it splurging extravagantly or penny-pinching when it comes to R&D, measured against its buddies in the playground?

Here’s where ratios like R&D-to-Sales and R&D-to-Operating Cash Flow take the center stage. They’re like the spotlight on a company’s innovation groove.

Picture this: you’re eyeing companies that wear innovation like a second skin, companies that don’t just innovate because they have to, but because it’s the very air they breathe.

4. A solid Sales team

Let’s talk business basics: Sales. It’s the heartbeat, the lifeline, the raison d’être for every venture.

Imagine a world where sales vanish. Yep, bankruptcy’s the next stop.

But hold tight, we’re not just talking any old sales here. We’re diving into a realm where satisfied customers keep coming back for more.

Top-shelf investment candidates? Those that craft products so sublime, they practically sell themselves. Who needs marketing when your offering shines so bright it’s practically a cosmic beacon?

5. High Profit Margins

When investing, profitable is the name of the game.

Eye those companies with a hearty profit margin, aiming for at least a 10% slice. In other words, for every buck they rake in, they’re banking 10 cents of sweet, sweet profit.

But here’s the golden nugget – choose companies whose profit margins tower over their peers. It’s like a neon sign that reads “Efficiency Masters.”

6. Improving Profit Margins

Here’s the savvy investor’s motto: Beware the reversion to the mean.

Here’s the trick: Consistently maintaining or boosting profit margins isn’t child’s play. It’s the realm of the competitive edge, where companies hold the high ground and don’t plan on relinquishing it.

7. Decent culture

Listen up, culture matters – a lot.

In the long haul, shareholder value isn’t just about numbers. It’s about the people that make those numbers dance. Companies with a culture that treats their staff right? They’re the ones to watch.

When employees feel like they’re part of something bigger, when they know they’re valued and respected, they raise their game. And when they raise their game, you can bet your bottom dollar that shareholder value gets a boost too.

8. A founder-led management

Here’s the thing: Skin in the game counts. And it counts big time.

Research paints a clear picture: Companies led by founders or families outpace the market by a staggering 3% per year. Yes, you heard that right – 3%. A feat that leaves many investors in the dust.

So here’s an idea: A cluster of founder-led companies might just hold the secret sauce.

9. A backup plan in place

Reality check: Humans aren’t immortal.

Sure, a stellar founder might be steering the ship now, but one day that might change. What then?

A smart company’s got a backup plan. An insurance policy against the corporate apocalypse should the star player exit the stage.

10. Know the company inside out

Break it down. Tear it apart. Know it inside and out.

Smart companies dive into the nitty-gritty of their financial machinery. They measure, scrutinize, and weigh every cog in the wheel. Unit economics? They’ve got a microscope on that too.

Why? Because they understand their business down to its DNA.

11. Own patents

Let’s talk patents – the fortress of innovation.

Having a formidable patent game can keep profit engines purring. A strong position here means you get to play the profit game on your terms. But keep in mind, the patent clock ticks. Once that magic fades, so might the profits.

Patents aside, factors like top-notch talent, a sterling reputation, a slice of the market pie, all play a role in the competitive chessboard.

12. Long-term thinking

Investing? It’s a test of patience.

You’re playing the long game, optimizing risk and reward.

Just like investors, companies need a marathoner’s mindset. That’s how shareholder value truly blossoms.

13. Not diluting shareholders

Beware the dilution game.

Rising capital or stock-based compensation? They nibble away at your stake in the company. What you’re after are companies where shares aren’t multiplying like rabbits, but maybe even receding through share buybacks.

Think AutoZone, which reeled in over 50% of its shares since 2015.

14. Management admits mistakes

In the words of Charlie Munger: Mistakes are inevitable.

It’s not about dodging the fumbles, but how you recover the ball. And for companies, that’s in how they own up to their missteps and keep their shareholders in the loop.

Red flag: Companies that play hide-and-seek with bad news. You’re after the truth-tellers.

15. True integrity

Investing isn’t just numbers and graphs; it’s about the people behind them.

Ask yourself: Would you want your daughter marrying the CEO? If that answer’s a resounding yes, you’ve found a manager whose integrity matches their skill.

⬇️ Philip Fisher Quotes ⬇️

“The stock market is filled with individuals who know the price of everything, but the value of nothing.”

“The stock investor is neither right nor wrong because others agreed or disagreed with him, he is right because his facts and analysis are right.”

“Never promote someone who hasn’t made some bad mistakes, because if you do, you are promoting someone who has never done anything.”

“The greatest investment risks are the ones you take without knowing what you’re doing.”

“The stock market is a device for transferring money from the impatient to the patient.”

— Philip Fisher

⬇️ More from thoughts.money ⬇️