Philip Fisher's speech to Stanford Business School

One of the greatest investing minds shared insights with students of Stanford Business School in one of his last public speeches.Buffett credited Philip Fisher with inspiring him to look at good businesses and consider intangibles such as branding,competitive position and etc.The speech is a rough summary taken from an old Motley fool discussion board post(2001).

The setting is a lecture at Stanford Business School. Phil Fisher lectured the class of his former (1961) student, Prof. Jack McDonald.

Prof. McDonald: (introduction)

- Mentions in passing to that Warren Buffett had some very nice things to say about Philip Fisher at Berkshire's last annual meeting.

- McDonald: Phil Fisher said that we ought to analyze the suppliers and competitors and customers. Modern business strategy owes a debt to Phil Fisher and we ought to acknowledge our intellectual heritage.

- Phil Fisher was a pioneer in high-tech growth investing. In 1961 McDonald's class studied Texas Instruments because Mr. Fisher was interested in semiconductors ... and Phil Fisher was one of those people who said, "Why don't we look and see if the semiconductor can be embodied in a great company like TI?"

- Thanks to Phil Fisher, Prof. McDonald enjoyed a 100-bagger. (Motorola)

- Briefly mentions Dell Computer and a member of the class who six years ago invested $10,000 -- now worth over $1 million.

- Once you get diversified with 7 to 10 stocks in a portfolio, most of the benefits of risk reduction have taken place.

- McDonald wants his students to understand that the standard in Mr. Fisher's mind of understanding a company has always been so high compared to what most of us think about ...

Phil Fisher:

- Advice: (1) Buy a house, (2) save and (3) invest for the long term.

- P/E's don't tell you what's good, just what's cheap.

- What's good? Most important is outstanding management.

- If you can recognize what to look for, you're on your way.

- A typical company gets comfortable, doesn't like change, but has competitors down the street who are thinking of something new that's going to obsolete the status quo. Your company has got to be the one running ahead of that change.

- One way to recognize proper management is to look for their response to that change. The importance of that difference may be translatable into huge market share or even survival.

- Job #1: Identify the key problem today.

- Fisher identified one major problem facing companies today: Young couples with young children. Often both parents work. Companies that successfully address this issue have an enormous competitive edge over companies that haven't.

- "It amazes me that so little attention is paid to something that produces big results. Almost nobody gets to the heart of where the problem lies. Anybody can win the loyalty of their employees by giving away the store. But that company isn't going to prosper."

- Response to attendee: "In my own management, having even as many as eight stocks is the beginning of a real danger signal."

- Fisher: "I believe strongly in diversification. But I do not believe in over-diversifying."

- Fisher: "I'm very nervous about this market ... there are too many damn fools and complete ignoramuses who have never had any finanacial experience before that own too big a portion of stocks today ..."

- When to sell? If the company deteriorates. "However, my record of holding stocks a very long time is well known. But I've still made more mistakes by selling some of these good stocks too soon than I have in any other factor of handling my investments."

- International investing? Don't think so.

- Must build up personal contacts before investing in a business, therefore traveling is a necessary evil. Neglect it at your own risk.

- If you haven't met management, you haven't done your job.

- Fisher always wants every source of contact he can get.

- Quantitative factors are overrated. Quality's what counts.

- We have a huge volume of financial data, but the quality hasn't improved much.

- Two things to look for: candor and personal commitment.