Source: Smart investors.

The late Philip Fisher (1907-2004) is one of the most influential investors in investment wisdom.

In fact, Buffett himself has also stated that his investment style is 15% Fisher and 85% Graham.

Fisher rarely speaks publicly, but he did give an interview to Forbes in 1987.

At the time, the market was permeated with concerns about runaway inflation and fear of the S&P 500 index falling about 30%. In this exchange, the 80-year-old Fisher was rational, convincing and humorous.

When asked about the difference between his investment method and Graham's, Fisher described it this way:

One is the Graham method of finding stocks that are intrinsically very cheap and almost impossible to drastically decline. He has financial security in this stock which will not decline significantly and will eventually appreciate.

The other is my method, which is to find very good stocks at a reasonable price and then wait for these stocks to bring great growth.

Fisher became famous for his book "Common Stocks and Uncommon Profits" published in 1957. His teachings achieved something that few people can do: simplify the investment process in a way that laymen can understand.

He also popularized the term "grassroots research," which involves conducting thorough due diligence by going out to talk to competitors, suppliers, customers, and employees to understand a company's actual business operations beyond its regulatory filings.

Today, we have made the Internet an integral part of our daily work and life, which makes it much easier to dig up information. However, going out and doing field research still has its value.

Fisher made significant contributions to helping more people recognize the value of qualitative analysis. These qualitative factors are not found in regulatory filings, such as the quality of management, whether there is a lasting competitive advantage, and so on.

In fact, knowing the concepts of investment masters such as Buffett, Peter Lynch, and Fisher, we will find that they do not make the investment process too complicated and obscure.

Feeling that you can control something infinitely unpredictable like the stock market can make you feel very comfortable, but great investors understand this and know that they don't know anything, which also makes them feel comfortable.

And they often express their opinions without using professional terms.

Buffett, Lynch, Fisher, and many others did this very well.

There are many great quotes in the interview.

I think a weakness of many people's investment methods is that they try to be a "jack-of-all-trades" rather than a "master of all trades."

Understanding a company's management is like getting married. You never really know the girl until you live with her. You won't get to know them that well until you live with management.

The shortest time I have held these 14 stocks is eight or nine years, and the longest is 30 years. I don't want to spend time earning meager returns. What I want is very, very large profits, and I have enough patience to wait for them.

"Real success does not come from going against the trend 100%." Being able to see the errors in the commonly recognized way of doing things is one of the elements that leads to great investment success.

The only method I recommend is to get a record of their actual work. If they quickly cut losses and make small gains while continuing to increase profits, give them a gold star. If they make quick profits and then let loses run wild, stay away from them.

This conversation took place on October 19, 1987.

Philip Fisher worked in a nine-story unremarkable office building in San Mateo, California, just a 30-minute drive south of San Francisco.

There was a small table outside the office where his secretary sat, along with several file cabinets, a phone, an answering machine, and not much else.

There were no computers, no Quotron machines, and no fancy library, just a mind that was full of investment insights and practical experience.

Now 80 years old, Fisher is still energetic, sharp-minded, and quick-witted.

He still manages money and is still learning to do better every day.

Here is the translation of their conversation.

01 Focus on trends, but don't try to time the market.

Q: What have you been focusing on lately?

A: I've seen new stock issues for some companies that don't appear all that outstanding, yet they may sell for five or six times revenues. And then some very commonplace-looking stocks go out at three or four times sales.

I think this is a potential danger signal.

I'm not saying this means a crash next month. I only mean it's a sign that there may be something basically wrong with the market, despite its strong advance thus far this year.

Now is the time to be cautious.

I see the loans being made by banks everywhere in the country are very high risk.

The amount of nonpaying consumer loans compared with their incomes is abnormally high.

What are these assets everybody's talking about? Residential real estate is more of a bubble in this country than the stock market. But nobody's doing anything about it.

There's also the problem of the trade deficit, which is a potential trouble spot.

Fed and government policy is encouraging foreign lending and supporting the bond market. I mean, foreigners are being encouraged to buy more of our assets. It's outrageous. It's insane. It's pure short-termism.

Someday these foreigners will want their money back. Then what happens to the dollar and our markets? It's frightening to think about.

Yet you hear these monkeys in Washington say, 'We must make government bonds more attractive so foreigners will buy more of them.' That's monstrous. That's sadistic. It's also very, very stupid.

When you put all this together with the desperate financial situation in many third world countries, you will find that the current situation is not much different from the late 1920s. In terms of product structure, 100-300 billion yuan products operating income were 401/1288/60 million yuan, respectively, and overall sales volume in 2023 was 18,000 kiloliters, a year-on-year increase of +28.10%, which was a significant growth.

From 1929 to 1933, we went through four years of economic hell, causing psychological trauma to those who experienced it. You will see people with fixed incomes losing their jobs, and the wealthy dismantling all the light bulbs in their homes, leaving only one in each room.

I know a manufacturing executive who became a security guard, while his wife started to do cleaning and cooking.

When will the crash come?

In 1927, some very smart, capable, and sound people were scared to death. But the bubble continued for another two years, and such a situation may still recur today. (You know the bubble is big, but you cannot predict when it will burst.)

So, I don't know.

We have learned how to take painkillers. This medicine is very simple, turning on the printing press or credit machine, spending a large amount of government funding and expanding credit.

Rather than a collapse, it is more like the malignant inflation you see in Argentina and Brazil.

I think that within two or three years, malignant inflation will begin and then continue for four or five years.

If so, how can we protect ourselves from the impact of malignant inflation?

I have studied in depth what happened in France and Germany after World War I, where the former suffered serious inflation and the latter suffered hyperinflation.

The same thing happened in both countries.

Even if you buy the best stocks according to my definition, instead of just any stocks, you will still feel uncomfortable during the period of soaring inflation.

But (if you do this), when inflation ends, your actual purchasing power will still be about 80% intact.

If I can get out of trouble with 80% of my assets, and my employees can also do the same, that would be great. Before that, I will hold a considerable number of treasury bills.

Seizing the opportunity is a very difficult thing. I don't expect to be a smart person.

I don't want, when the outbreak comes, to spend too much time preparing (not having enough cash on hand).

When you are unsure, you will hedge.

Roughly speaking, I currently have 65-68% of my funds in the four stocks that I truly like, 20-25% of my funds in cash and cash equivalents, and the remaining small amount of funds in five stocks that are under observation.

The similarities of holding core stocks

Why don't you own or buy a large number of stocks?

What I really want are four core stocks. They account for most of my holdings.

I have five other smaller stocks, all of which may enter this group. But I'm not sure yet. If I bet today, I will bet on two, not the other three.

In every decade so far, excluding the current 1980s (which is still in progress), I have found very few stocks, a total of 14.

Starting from the two in the 1930s, these stocks have brought me profits ranging from seven times the amount invested to thousands of times the amount invested in a few years.

More of the securities I am currently investing in have more unrealized gains on the books.

I have also experienced losses, with losses of up to 50% twice. And some of them made me earn or lose 10%. This is almost the cost of doing business.

But in many cases, when (the stock I'm interested in) falls, I will buy more stocks, which has brought me huge returns.

The shortest time I have held these 14 stocks is 8-9 years, and the longest is 30 years. I don't want to spend time making meager profits.

What I want is a very, very large profit, and I have enough patience.

What is the commonality of your core stocks?

They are all low-cost manufacturers, leading companies in their respective fields, or comparable to my other benchmark-Japanese competitors.

They both have promising new products and management capabilities far above average.

Do you attach great importance to the management of the company?

Understanding a company's management is like getting married. Only by living with a girl can you really get to know her.

You won't get to know them to that extent until you live with the management.

Going back to the type of company you like, those that can help you and your clients through difficult times...

My own interests are mainly focused on manufacturing companies, which can expand the market through some means (I hate the trendy word "technology") using the discoveries of natural science.

In other fields, such as retail trade and stocks, there are also good opportunities, but I think this is the area where I am more competent.

I think a weakness of many people's investment methods is that they try to become a "jack-of-all-trades" in various industries, rather than a "master of all trades."

Are you still paying attention to other stocks?

Fisher: I'm spending time researching some stocks that I'm not in a hurry to buy.

But under pressure from the rapidly falling market, I don't want to take too quick action on stocks I'm unfamiliar with.

Why Bullish On Motorola?

Fisher: But I won't mention the five stocks with relatively small positions.

I can talk about two of the four core stocks, Motorola and Raychem (founded in 1957, a pioneer in commercial products through radiation chemistry).

The third is a small-cap stock, whose floating supply is abnormally small, accumulated not only by me but also by other long-term investors. If Forbes mentions this stock, its stock price will skyrocket. But before profits begin to realize, it will drop once again. I don't want to cause this situation.

As for Motorola, Wall Street is only just beginning to see the true strength of its management. During the recent semiconductor slump, it was the only large company to make normal profits and do well. Among other companies, one has just balanced its income and expenses, and three others are seriously losing money. These kinds of things attract Wall Street, but Wall Street has not paid attention to the real factors behind them.

For example, more attention should be paid to whether the company conducts statistical quality control of production - shortening the production cycle, thereby reducing inventory and lowering costs.

Motorola far exceeds the average company in terms of planning. One reason why its semiconductor business can perform so well under pressure is that it has chosen the right field and has not put most of its energy in areas that will encounter more trouble.

Another reason for the outstanding performance of the company is attributed to Chairman Bob Galvin's foresight and high moral standards.

Currently, Motorola's stock price has not entered the "cheap shelf," but it will have a very pleasing growth.

Raychem is another case. (Note: Raychem's sales reached $944 million, mainly producing high-performance plastics.)

看好 Companies should pay more attention to product quality control through statistics and shorten their production cycle to reduce inventory and costs.

Motorola far exceeds the average company in terms of planning.

One reason for the outstanding performance of its semiconductor business under pressure is that it has chosen the right field and has not put most of its energy in areas that will encounter more trouble.

Another reason for the company's outstanding performance is attributed to Chairman Bob Galvin's foresight and high moral standards.

At present, Motorola's stock price has not entered the "cheap counter," but it will have a very pleasing growth.

Raychem, on the other hand, is different. (Note: Raychem's sales reached $944 million, mainly producing high-performance plastics.)

Several years ago, the company's management realized that the old product line could not maintain the annual growth rate of 20% to 25% since the company was founded. Raychem has developed a series of new technologies.

But they underestimated the time it would take to reap the benefits from these technologies. It has been pushing these technologies to the market over the past few years.

Now, those who are interested in growth but are not familiar with the business often measure growth by the amount of R&D expenses.

In fact, when launching new products, R&D is important but costs less than marketing expenses. Because when new products are just launched, marketing expenses and high-cost production expenses coexist, and the (market) learning curve has not yet formed.

These new products together resulted in a flat income in the past few years.

For a company that has been steadily growing before this, this has greatly reduced its short-term prospects on Wall Street. Now, people have great doubts about it. Is it really a growth company?

In my opinion, it is a microcosm of a growth company, but its P/E ratio does not fully reflect this.

Q: Besides excellent management, what else do you value?

Fisher: When I have to argue fiercely with clients about good assets, they say, "Well, if you say so, we'll do it." I am more likely to be right.

Instead of sometimes saying "Let's buy 10,000 shares," and they say, "Why not buy 50,000 shares?" This is usually a warning sign that it is already too late to buy.

I don't buy stocks that are popular in the market. When I attend tech stock meetings, I especially notice that everyone is cramming into the conference room.

If the venue is standing room only, it usually means it's not a good time to buy stocks.

Q: You sound like a contrarian.

Fisher: Real success is not always taking a completely contrary position.

When people saw that cars would replace old-style tram systems in the city, some people decided to buy tram stocks since nobody wanted them.

This kind of contrarian thinking is absurd.

Being able to see the fallacy from the recognized way of doing things is one of the elements of investing that achieves great success.

04 Be a rare long-term investor

Q: What is the most important lesson in your investment career?

Fisher: People try to buy today and sell tomorrow, which is really scary. At best, it's a proposal for a small win.

If you are a true long-term investor, the profit will be much greater. There are few people who can do this, and I am one of them.

One of my early clients once said, "No one goes broke by taking a profit." Although the theory is correct, it is completely impractical. Okay, profits won't make you go bankrupt, but everything you do requires profit.

It did not take into account the mistakes you will inevitably make in your investment business.

Interestingly, I know many people who consider themselves long-term investors, but they are still very happy to buy and sell stocks in their favorite stocks.

A few years ago, I served as an advisor to a large commodity distributor's profit-sharing trust fund.

I bought Texas Instruments stock for them at $14 per share, which was later split 15 times. When the stock rose to $28, the pressure became huge, and everyone felt, "Why don't we sell half to get back our bait?"

There are many voices,"Philip, sell a part of it, and we can buy it back when it falls again."

This is a completely absurd argument. Either this investment is better than another, or it is worse than another. Taking back your bait is just a psychological comfort issue. It is unrelated to whether this move is correct or not.

But we did it. Subsequently, the stock rose to more than $250 within two or three years.

Then there was a big pullback, falling to more than $50. But it didn't fall below $35.

Question: What made you give up so quickly?

Fisher looked back at the 1930s.

The company I really started my business with was FMC, which was called food machinery at the time. Two-thirds of that company's business sold to fruit and vegetable can manufacturers.

So I started to learn a lot about the canned food business.

During that period, I bought California Packing, the product line of Del Monte Company, at a low price three times and sold it at a high price when the prospects of the canned food business were not good.

I also bought stocks of food machinery companies for clients, as long as they were willing.

Then in 1940 or 1941, I reviewed the bidding situation and found that I spent much more time on buying and selling California Packing stocks than I did studying and observing food machinery stocks.

By 1940, the latter's gains had far surpassed the former.

This episode eventually led me to give up the most popular rule at the time: making profits by buying low and selling high.

Question: Warren Buffett once said that 85% of his investment philosophy was Benjamin Graham and 15% was Philip Fisher. What is the difference between Grahamism and Fisherism?

There are two basic methods of investment in Fisher.

One is Graham's method, which is to find some stocks that are essentially very cheap and almost impossible to fall sharply. He has financial security in this. This stock will not drop significantly and will eventually appreciate.

The other is my method, which is to find some very good stocks, on the premise of not paying too much cost, and then wait for these stocks to bring very large growth.

The advantage of doing this is that a large part of the stocks I hold can perform well in a relatively short period of time, even though some of these stocks may take several years to start rising, and I may make some mistakes during the process.

When a stock is really unusual, most of its (rise) trend will appear in a relatively short period of time.

The disadvantage of Graham's method is that it is a very good method, almost everyone knows it, and has learned how to follow suit (very cheap is hard to come by).

I don't want to say that my method is the only way to success. But I think I started investing like this before people even thought of the word "growth stocks". Maybe this is a bit arrogant.

05 likes to invest until you can't do it anymore.

Question: How many clients do you have now?

Fisher: The God of Death took away many of my clients. In fact, I only have nine clients now.

Originally, I thought that when I was 80 years old, some of my clients would begin to worry about whether they should entrust their investments to someone who was expected to live much shorter than a few years ago. I was surprised to find that most people didn't worry at all.

The reason is simple. The stocks I invest in have some common characteristics that I mentioned earlier. If they start to decline (you should know that many companies will eventually decline), it will take at least five more years.

If I leave this world tomorrow, my people will have enough time to consider (how to handle) these stocks. And under the current momentum, they will still benefit from them.

Question: You don’t really sound like a retiring person.

Fisher: I can spend half an hour explaining how foolish it is for people to be forced to retire at 65.

I think I have achieved better results in the past five years than any other five years. By thinking about my own mistakes and constantly improving myself, I continue to make progress.

I have seen many people age as they get older. If this happens to me, with my sense of responsibility, I will definitely put down what I am doing.

But unless this happens, I won't stop liking my job.

Question: For those who cannot be your clients, do you have any suggestions for choosing investment portfolio managers?

Fisher: The only method I recommend is to let them give you a record of their actual work.

If they quickly cut their losses, even in small amounts, and allow their profits to continue to grow, then give them a gold star. If they quickly make a profit but let their losses run, then stay away from them.

Editor/Somer