Tag Archives: Investment Philosophy

Business Articles, Investing, Investment Philosophy, Learn About Investing

Qualitative Growth Investment Philosophy

This post will share and demonstrate what is written and communicated inside of Phil Fischer Book which is the origin of Qualitative Growth. A investors greatest concern should be managing Risk. If you manage to understand your business and all it’s unique qualities while considering Risk? It’s likely you have stumbled upon the foundation of Qualitative an Growth Investing Principles.

Asking detailed hard questions. Example: When we buy or invest in any company or security? It is only natural to ask detailed educated pointed questions and do some due diligence before we make that investment. And if we add in the fact we are not seeking dividends? That is basically the foundation of Phillip Fisher’s Investment Philosophy Growth Investing. Let’s get into some examples of questions and details.

Charlie Munger may he rest in Peace long ago when Berkshire was growing. Convinced Warren Buffett to begin considering and partially adopting the Phil Fisher philosophy of investing to implement into the Berkshire’s strategy. If I remember correctly this video should help. Warren Buffett starts by sharing Phil Fisher’s Book is one of the best Books on Investing.

Who is Investor Phillip Fisher

Philip Arthur Fisher was an American stock investor best known as the author of Common Stocks and Uncommon Profits, a guide to investing that has remained in print ever since it was first published in 1958. Mr. Fischer basically began using his insights as a Investment Philosophy. Example, assume If a stock is going to outperform the market longterm? In this case it does not matter what the current price is! Becuase the performance over time will outpace the price volatility and increase if you have done your due diligence and leg work correctly.

Mr. Fisher focused on Qualitative Fact finding and positive assumptions backed by verifying tangible information. The fact he did such heavy investigating is that his findings may lead to a Stocks growth and having the right information for his investment fundamentals over the longterm.

Put another way? Qualitative investing requires assumptions about the future that are made on the basis of quality. An analyst will make judgements on the prospects of the stock based on the qualitative attributes of the company.

Mr. Phil Fisher career began in 1928 when he dropped out of the newly created Stanford Graduate School of Business (later he would return to be one of only three people ever to teach the investment course) to work as a securities analyst with the Anglo-London Bank in San Francisco.

Growth & Qualitative Investing

Mr. Fisher wrote in his book detailing a basic checklist that helps investors sift and sort through Stocks and Investment Opportunities using Qualitative and a checklist of sophisticated questions that arrive at a “YES,NO or Maybe” conclusion. This strategy of investing gave birth to Growth and Qualitative Investing.

Asking Questions that helped Mr. Fisher?

  • Does the company have excellent management teams?
  • How is the Business’s Qualitative Fundamentals on the Balance Sheet rather than using ratios?
  • Stock Price is not evaluated. So if a Stock is Expensive currently Fischer’s reasoning looks towards the long term growth of the business which will outperform short term stock pricing models.
  • If a investment fails any of the questions on the Checklist after investing? Mr. Fischer makes it a point to move on selling the investment.
  • Understanding the Business and what makes the business work? Valuable question.
  • R&D Spending? If target company is outspending and outperforming competitors? This is a good indicator or qualitative fundamentals at work within the business.
  • What makes the Business grow? Very important to understand.
  • Does the Business have repear customers?
  • Business profit margins must be healthy.
  • Does the Executive Management have outstanding community relations?
  • Is the cost analysis and quality controls of the business products and services accounted for? Will this share information about operations?
  • Is the Companies Management Integrity Unquestionable?
  • Would you want your family to work in this business? And does the community value the Business’s presence?
  • Is there room for growth in the space and is the company’s management providing information about current industry forecasts?

These are all questions Mr. Fisher has shared in his Book written in 1958, which have withstood the test of time. And yes many of these questions have evolved with time into my own use. And in all fairness most of these assumptions or questions still very much apply and are used today by Institutional Investors and Professional Investors who manage Fund’s. You may recognize some of the fellow Buffet followers who use these methods of Investigating Investments. Professional Investors and Fund managers like Guy Spier, Christopher Tsai, Li Liu, Chuck Akre, Seth Klarman, Peter Lych, Bill Ackman and many more.

Conclusion

In Conclusion for today’s post on learning more about Growth or Qualitative Investing Philosophy, we must look at what works in the markets as legitimate Investment Philosophy and what doesn’t work. If you consider most individuals investment experience and ability to mitigate and consider investment RISK. Most retail investors who day trade do not have Advisors. This ends up making them lose money and treat the Stock and Credit Markets like a Casino. Their goal is always the same. They are hoping and praying that twenty dollar stock they just bought with their life savings will rise in the next week or few days. But this is absolutely not how the Professionals invest. Nothing about investing can be done from feelings or judging ones own intuition! It takes serious investigation and professional trained discipline.

Individuals who don’t use any Investment Philosophy will likely be humbled by the sudden unemotional Market Volatility. Magellan Fund Manager Peter Lynch loved volatility for this exact reason. He used volatility to invest as a Value Investor during times were Fearful. So in all fairness? I think it’s safe to say after reading the Book by Mr. Phil Fisher the more sophisticated detailed and creative questions we ask about a Investment opportunity? The better off we will likely be years down the road. Thanks for reading everyone Please do read Mr. Phil Fisher’s book. Uncommon Stocks and Uncommon Profits.

I appreciate you reading my Post. It was a blast preparing this for you. And to my fellow Professionals who do run Investment Funds and use Mr. Fisher’s Investment Philosophy? Please do drop me a line to correct anything I may have written or shown in this post that is incorrect. I am doing my best with what I have. Thank you. JS

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Business Articles, Investing

Howard Marks 6 Investing Principles

Recently, I was listening to Oaktree Capital’s Co-Founder Howard Marks, it was clear I needed to pull up my notes and write down these 6 Investing Principles that give Oaktree’s Team an Investing Edge in the Market.

Like most value investors we all know the steps of using Benjamin Graham’s strategy from the Book Intelligent Investor when valuing a Stock or Investment that is trading at a steep discount. Well like Graham, Mr. Howard Marks puts his twist and strategy to work while adhering to a few universal basics that Graham has taught us all as Value Investors. It is said that when Mr. Marks writes an Annual Letter, or his famous Yearly Memo and releases it, Warren Buffett stops what he is doing and reads it. 

During an interview recently, Mr. Marks shared “I wrote my yearly memo for nearly twelve years and knew that not many people would read it, but one day after the fifteenth year or so, it basically became an overnight success”. That gives me hope that my little Investment Blog might one day be as interesting as Mr. Howard Mark’s Annual Memos.  

These Principles Guide Our Investment Process

  • Risk Control: Managing risk should be an Investment Management’s Greatest Investment Objective. Without managing risk through extensive diligence and heavy research and planning, our investment thesis may be unproven. 
  • Consistency: When thinking about making Bad Investments to knocking one out of the park like a baseball player, an Investor must be consistent with the performance of their investments. On a scale of 1-10, it’s great to be hitting home runs with Investments that always win, but when things go bad, and they often do with unforeseen risks with Investments, it’s better to be averaging a success rate range in the upper middle of 3-6 max, and not allowing the bad beats of Bad Investments to bring down your Median Average of Consistency. This is very important.  
  • Be selective and look inside the less efficient markets for opportunities: Most markets are highly efficient, but there are places within markets where efficiency is lacking. Those are the spaces where you will be able to apply the Value Investor Graham Basics and WIN! Finding Investments that are “cheap” and look over-leveraged, may be exactly what you have been looking for to apply the skills we have learned over the years. Marks says you will find deals in Emerging Markets where information is not as transparent and available.   
  • Focus on a high degree of Specialization: Mr. Marks says, “Our people at Oaktree do a few things well. We are not Generalists”. 
  • Investment decisions are not driven by Macro Forecasts: Don’t allow the wind blowing over the markets to catch your sails and take you off course to faraway lands. We are Fundamental Analysts; we use the Bottom-Up Strategy. 
  • We are not Market Timers: Mr. Marks emphasizes, “If it’s cheap today, we buy it! We don’t need to wait six months and see if it will be cheaper. That makes no sense”. I tend to agree with Mr. Marks. When you’re looking for investments, your thesis is proven correct or it’s not. Apply the Rules and Skills we have been taught. 

Did you catch my last Article on Commercial Real Estate HERE.

Additional notes from Mr. Marks that are relevant to Investment Management and Investing for Success:

  • “You can’t predict, but you can prepare”. 
  • “Having a large number of Good Investments is our Mantra”. 
  • “Find good companies with correctable Bad Balance Sheets”. 
  • “Distressed Debt holds opportunities”. 
  • “Find good companies that have fallen on hard times”. 
  • “Look for companies with good management, with Too Much Debt”. 
  • “How do we fix this?” 
  • “Our Credit committee during the bankruptcy process can fix and raise the value. We receive profits from our efforts”. 
  • “We reject onerous Debts”. 
  • “We are not turnaround artists”. 
  • “All we focus on is Senior Secured Debt Obligations”.

In the end, our team avoids Losers and Bad Companies! 

In Conclusion

In conclusion to this week’s post on Investing Philosophy, if you adhere to and adopt the unique and proven principles in this post for your own purposes, you will likely be happy with the results. I do hope you learned something from Mr. Howard Mark’s Investing Principles. 

Feel free to share today’s article. With that, I thank you for stopping by and reading. And I hope you will come back and visit my Investment Blog soon.

Godspeed.

JS

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