How to invest like Philip Fisher

One of the biggest and most challenging questions Philip Fisher ever dared to ask a corporate manager was “What are you doing that your competitors aren’t doing yet?” Whilst relatively crude, such a question is often disregarded by those involved in business, who often can barely give a convincing answer when confronted with it.

In a similar fashion, those involved in investment should ask a similar question: “What am I doing so different from the crowd?” The lack of a proper answer entitles an investor to average returns, at most, in which case he would be better off investing in passive index funds (see last month’s Invest Like…John Bogle column) while enjoying the free time elsewhere.

Superiority in business is achieved by anticipating the future, by pledging resources to develop innovative products that allow a company to gain market share over time and to enjoy a high growth rate. By the same token, a successful investor needs to commit his time and effort to researching the market to uncover what others don’t: the young companies of today that will turn into the biggest companies of tomorrow due to their outstanding growth prospects.

Philip Fisher, the focus of this month’s column, was always seduced by innovation, well before Silicon Valley was created. But, from the very beginning of his career, Fisher believed that only through innovation could a company outpace its competition, and this way grow faster than the market and provide superior returns to investors over the long run.

Together with Thomas Rowe Price, Fisher is considered one of the fathers of growth investing, a strategy that is often opposed to value investing. However, Fisher himself was not one to discard the tenets of value investing. The “scuttlebutt” strategy he developed to uncover the best investment opportunities is part of a refined value seeking strategy, aimed at buying outstanding growth prospects based on an intelligent appraisal of the underlying business’s characteristics – that is, buying growth at reasonable prices….

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Filipe R Costa: