“…finding the really outstanding companies and staying with them through all the fluctuations of a gyrating market proved far more profitable to far more people than did the more colorful practice of trying to buy them cheap and sell them dear.”
-Phillip Fisher, Common Stock and Uncommon Profits
After giving The Intelligent Investor a rigorous rundown, I felt it necessary to look at the other side of the coin. Value investing tends to make much sense, but what could be missing? In the last decade of the market, and particularly the last few years, has value really been the driver, and to boot, have investors been creating opportunities for the shrewd among us? Phillip Fisher expands, “These opportunities did not require purchasing on a particular day at the bottom of a great panic. The shares of these companies were available year after year at prices that were to make this kind of profit possible.”
FANG comes to mind; Facebook, Amazon, Netflix and Google. These are fantastically managed companies which have been holding the boat above the water. Benjamin Graham would advise against, at least according to my shallow understanding of his methods. These companies have grown out of their IPO skin though, and all turn a profit. Their Price/Earnings ratios span from pricey to atmospheric; Facebook 49, Amazon 223, Netflix 379 and Google 34.
Phillip Fisher would likely call these stocks the companies to buy and hold for a lifetime. It seems as though we have been living in a Fisher-like world for some time. Many pundits are calling for a pull-back when a slow reversion to the mean could be just as likely. Either way, this decade may belong to Fisher, but on the day Grahams methods start to be ruled out as hogwash, those who remember will profit.
Sources: Common Stocks and Uncommon Profits