If you’ve been following along with some of my blog posts on the extremely popular book, ‘Common Stocks and Uncommon Profits’ by Phillip Fisher, then you know already that Fisher is a great philosopher of growth investing.
And if you’ve read any of my posts before, then you know that I love myself some great investing quotes, so why not combine the two? Buckle up! It’s time for some favorite Phillip Fisher Quotes on Value Investing!
“Never promote someone who hasn’t made some bad mistakes, because if you do, you are promoting someone who has never done anything” – Dr. Herbert Dow
I think this is fantastic advice, not only with investing but just in general. If your leader hasn’t failed before then they don’t know how to recover from failure and I think that is a dangerous thing.
This actually was a legit concern recently with a baseball player in the minor leagues, Vladimir Guerrero Jr. He had never really failed when coming up through the minor leagues and his Major League team was scared of what might happen if he stumbled. Fortunately for him and his team, when he got to the majors he freaking killed it.
Unfortunate for the other 29 teams out there!
But the point is that knowing how to fail, get back up and handle adversity is extremely important because things aren’t always going to go as planned. You need someone that can right the ship when the waters get tough, and you should challenge yourself to be this type of person as well.
“If you can’t do a thing better than others are doing it, don’t do it at all” – Dr. Herbert Dow
This is so true when starting a business and it’s important to you when looking for a company to invest in. If you’re going to invest in a company then they better have some sort of competitive advantage.
That doesn’t mean that they have to be a better buyer than Walmart or use customer data better than Amazon, but maybe it means that they can run more efficiently than those companies or that they do a better job of hiring and retaining, as well as promoting within, that can lead to long, sustained periods of growth and a strong company culture. Competitive advantage is a very loose term, but there needs to be one.
“Therefore, current excellent earnings don’t mean anything”.
Essentially, Fisher is saying here not to live in the past. I know, I know – I just spent a lot of time in previous posts saying that you need to look at a 7-10-year history to get a good picture of the company, but I think this quote further proves that!
This quote is referencing recent earnings instead of a sustained period of earnings growth like I am referring to.
One example that Fisher gives is that the economy was booming after World War I just to have the Crash of 1929 very shortly after that. Writing more on this quote really makes me think about a saying that is common in golf in that “your shot is only as good as the next one.”
Who cares if you hit your tee shot on a Par 3 to only 2 feet away from the hole if you miss the putt for birdie? Nobody! Past is great but it’s simply that – the past.
“Do Few Things Well”
Similar to having a competitive advantage, once you have found what that is, stick with it and become a master at that. I think this is incredibly important for companies that you’re investing in. I want to invest in a company that is focused, and they know how they can beat the competition and they stick their foot on the gas when they feel like they’re getting stronger.
“Nevertheless, an analyst must learn the limits of his or her competence and tend well the sheep at hand”.
Similar to doing few things well, you need to know what you’re not good at. Fisher specifically meant this when talking to people about investing and I believe in his philosophy. If you do not have the interest or desire to learn about companies and understand why they’re undervalued, then you probably shouldn’t be picking individual stocks.
If you’re a numbers geek that loves to understand business valuations, then maybe you should focus more on individual stocks and not on buying ETFs. The fact of the matter is that you need to know what you’re not good at and avoid doing those types of things.
If you’re very risk averse but you’re only 25 and everyone tells you that you need to take risks on your investments, should you?
Well, it depends.
Can you stomach the pain if your investments drop 50%?
Or, are you going to sell and lock in those losses at that time? If you can’t stomach the risk, don’t take the risk. You need to know yourself and your weaknesses and make decisions that save you from yourself!
“In and out may be out of the money”
This might honestly be my favorite quote of the entire chapter. Do not try to time the market. It will not work. If you want to buy the rumor and sell the news, feel free, but don’t come crying to me when it doesn’t work.
Fisher specifically recalls a time when he had to convince some partners not to sell his investment of Texas Instruments after it had gained 100% in a short-time. After it had gained 125%, the pressure to sell that he was receiving from the outside was immense, so he sold some but kept some as well.
Later on, he had a client urge him to buy some of this same Texas Instruments stock after it had dropped 80% but guess what, even after that 80% drop it was still 40% above where that same exact client had emphatically forced Fisher to sell before.
A lot of these quotes are great things to live by, not only in business or investing but life in general as well. A lot of them are simply about knowing yourself and making sure that you are properly prepared for situations that you might have.
If any of them stick out to you, print it out and tape it on your wall. Read that quote out loud to yourself each morning and make it an area of focus for you – I guarantee you will be better for it.