[2025–2026] Week 8: Philip Fisher’s Common Stocks and Uncommon Profits
Reading assignment and questions for week 8 of the Value Investing Seminar
(Note: If you are just joining the seminar, please start by reading the Introduction)
Note: Due to Thanksgiving, this assignment is due in 2 weeks, not 1, so please post your answers in the comments by Thursday, December 4th.
Those who have only vaguely heard about Graham rarely understand his approach. They might think all he did was net-nets or have known him only for the “Mr. Market” analogy.
By now, having read all of Security Analysis, you know there is much more to Graham than that.
Graham was a product of his time and experience. Having lived through, and lost money in, the Great Depression, he formulated a careful investing methodology centered around guarding against losses. To him, thorough study of the past was a prerequisite for forming a view of the future. The latter was something to be guarded against, not profited from.
While Graham’s primary approach was quantitative fundamental analysis, he acknowledged the importance of qualitative factors. However, he did not go into much depth on qualitative analysis, so in order to learn how to actually do it we will need to rely on other investing masters.
The overarching summary of Graham’s approach is reversion to the mean. He wanted to buy securities at prices low enough that even if the future were somewhat worse than the past, he would still do OK. He was also a broadly diversified investor, which was consistent with the medium depth of his research and the need for large numbers in order to capture the expected return.
Regarding Question 1 PatrickL wrote: “Graham suggests that when comparing companies in the same field, the best approach is to line up the basic financial numbers side by side over a long period. He wants the analyst to look at earnings records, balance sheet strength, capital structure, and consistency. The point is not to forecast the future but to understand which companies are truly stronger and more stable based on actual history. Graham prefers long-term averages rather than one-year snapshots because short-term results can be misleading.”
Regarding Question 2 James wrote “He says “The determination of the respective merits or attractiveness of common stocks at their prevailing market prices is the final an most difficult stage of the full-scale comparative security analysis. He says that the usual observation is that the qualitative factors favor the higher priced company, but the price favours the lower quality company, and “The analyst must accustom himself to this contrast or contradiction, because it is typical of stock-market behaviour.” He says in making this judgement “We believe that on the whole the market tends to exaggerate the significance of qualitative differences and thus to set too high a price” on higher quality companies..”
Regarding Question 3 Navin wrote: “Graham’s playbook is about systematically hunting mispricing with conservative assumptions and repeatable filters. He focuses on Net-nets and asset bargains i.e Stocks trading below net current asset value (NCAV) or below conservative liquidation value. He looks for Stability i.e 10-year earnings history with no large losses, and stable dividend history. Finally, Margin of safety i.e big discount to conservative intrinsic value.
Markets today are shaped less by hard assets on balance sheets and more by intangible drivers—software, data, brands, networks, and customer relationships—that don’t neatly appear as book value. Faster capital cycles mean advantages can emerge and erode quickly. Idea is on preserving his core—margin of safety, disciplined underwriting, absolute-return focus—while upgrading the toolkit to measure intangibles, cash flows, and competitive durability, and to react thoughtfully to quicker industry shifts.”
Regarding Question 5 PatrickL wrote: “My overall assessment is that Graham’s approach is still extremely useful. His focus on downside protection, long-term thinking, and conservative financial analysis stands up well even today. The parts I want to incorporate include using long-term earnings records instead of short-term numbers, checking balance sheet strength, and always thinking about the margin of safety. The part I would modify is being more open to high-quality, asset-light companies whose value comes from things like brand, network effects, or intellectual property. Those types of companies did not exist in his era in the same way, so I want to combine his discipline with a more modern understanding of competitive advantages.”
Week 8 assignment is to read Philip Fisher’s Common Stocks and Uncommon Profits. Due to Thanksgiving, this assignment is due in 2 weeks, not 1, so please post your answers in the comments by Thursday, December 4th. Read the whole book, it has 3 sub-books, and answer the following questions:
Question 1: What are the similarities between Fisher’s investing philosophy and Graham’s? What are the differences?
Question 2: What aspects of each, if any, would you like to make part of your own approach?
Question 3: How would Fisher define the margin of safety for an investment? How does that compare with how you think Graham would define it?
Question 4: How does Fisher approach valuation? What do you think about his approach?
Question 5: What do you think about Fisher’s checklist for assessing a company? Are there items you would add? Remove?
Question 6: What are the 3 most important criteria from Fisher’s list and why?
Question 7: If you were trying to generate potential candidates for the type of companies that Fisher is looking for, how would you go about it?
Question 8: Find 3 potential investment candidates that you think currently fit Fisher’s criteria and explain why they do so. Please go in some depth in your analysis/explanations for why they are a potential fit using Fisher’s criteria.
Question 9: What are the weaknesses of Fisher’s approach?
Question 10: Map Fisher on as many dimensions of an investment style as you can (use this article for reference on the dimensions: https://behavioralvalueinvestor.substack.com/p/build-your-own-investing-style-learn)
Question 11: Come up with an AI prompt based on Phil Fisher’s approach.
Note: Our next reading will be Warren Buffett’s Partnership Letters.
Now it’s your turn:
Submit your answers in the comments below this article with all your answers in a single comment. I will engage with some of the answers each week and highlight some of the ones I find most insightful in next week’s seminar assignment article.
Engage with the answers of some of your fellow seminar members in the comments below. Remember – the goal is to learn together. Be kind, be respectful and try to add to our learning as a community.
Feel free to ask any questions about the reading in your comment.
Until 2 weeks from now,
Gary
About the author
Gary Mishuris, CFA is the Managing Partner and Chief Investment Officer of Silver Ring Value Partners, an investment firm that seeks to apply its intrinsic value approach to safely compound capital over the long-term. He also teaches the Value Investing Seminar at the F.W. Olin Graduate School of Business.
Question 1:
Similarities:
Both believed strongly in fundamental analysis, insisting that investors should carefully study companies rather than rely on tips or attempts to time the market. They also emphasized a margin of safety mindset—while Graham coined the term, Fisher similarly sought to minimize risk by deeply understanding the businesses he invested in. Another common thread was their insistence on investor discipline, encouraging patience, rationality, and the ability to resist emotional decision-making in order to achieve long-term success.
Differences (Cigar butt vs Scuttle butt)
Their approaches diverged in important ways. Graham’s philosophy was rooted in value investing, focusing on buying stocks priced below their intrinsic value, even if they were “cigar butt” companies. Fisher, on the other hand, pioneered growth investing, preferring outstanding companies with strong leadership and durable long-term expansion potential. His famous “scuttlebutt” approach involved gathering insights from employees, customers, and competitors to identify businesses with sustainable growth and innovation. In essence, Graham prioritized price and safety, while Fisher prioritized quality and growth durability.
Question 2:
From Benjamin Graham, I would adopt the principle of a margin of safety and his disciplined, quantitative approach to valuation. His focus on fundamentals like earnings and book value helps avoid speculation and ensures capital preservation.
From Philip Fisher, I would take his qualitative lens—evaluating management, innovation, and competitive advantage—and his long term growth mindset. Holding outstanding companies for decades allows compounding to work, blending Graham’s protection with Fisher’s upside
Question 3:
Philip Fisher’s idea of “safety” was rooted in the quality of the business itself, not in buying at a discount to book value. He believed that if you owned an exceptional company with durable growth, strong management, and innovation, you were protected against long term risk.
“The most important qualities of a company are not found in its balance sheet but in its people.”
Fisher did not emphasize margin of safety in the same quantitative sense as Graham. For him, safety came from owning exceptional businesses with durable growth prospects, innovative products, and strong management. His “margin” was qualitative—if a company had unique competitive advantages and the ability to compound earnings over decades, then the investor was protected against long term risk even if the stock price looked expensive in the short run."
Question 4:
Fisher believed valuation was inseparable from the quality and growth prospects of the business. In Common Stocks and Uncommon Profits, he wrote: “The successful investor is usually an individual who is inherently interested in business problems.” For Fisher, the true measure of value was whether a company had the ability to grow earnings consistently over long periods. He emphasized that paying a seemingly high price could still be justified if the company’s future growth was strong enough: “If the job has been correctly done when a common stock is purchased, the time to sell it is—almost never.”
I think Fishers approach shifts attention from temporary mispricing to the enduring economics of the business. While Graham’s strict valuation discipline protects against downside risk, Fisher’s approach highlights the upside potential of owning truly exceptional companies.
Question 5:
Philip Fisher’s checklist of 15 points emphasizes qualitative analysis as below:
• Growth potential: Products/services with long term sales expansion.
• Innovation: Commitment to R&D and product development.
• Market leadership: Strong competitive position.
• Profit margins: Ability to sustain or improve margins.
• Sales organization strength: Effective distribution and marketing.
• Industry relations: Good standing with suppliers, customers, and regulators.
• Cost analysis: Strong cost controls.
• Labor relations: Positive employee relationships.
• Management quality: Integrity, competence, and vision.
• Depth of management: Not overly dependent on one person.
• Accounting transparency: Honest, conservative reporting.
• Long term outlook: Management focused on sustainable growth.
• Capital needs: Ability to fund growth without excessive dilution.
• Profit reinvestment: Smart use of retained earnings.
• Scuttlebutt method: Gather insights from employees, competitors, suppliers, customers.
I would add “Digital resilience” to this list, In the age of software is eating the world, important to have Cyber security, data strategy, and adaptability to tech disruption checked out.
Question 6:
My top favourite criteria would be “Market leadership: Strong competitive position.”
In the book, "Competition Demystified", Greenwald stresses that strategy boils down to whether a company can prevent competitors from eroding its profits. Market leadership is only meaningful if it rests on defensible barriers Bruce Greenwald reframes market leadership as not just being the biggest player, but having durable competitive advantages rooted in barriers to entry. He argues that true leadership comes from controlling something rivals cannot easily replicate—like local dominance, customer captivity, or cost advantages—not simply from growth or size.
I also follow the The Morgan Stanley Global Franchise Strategy that invests in companies Characterised by their powerful intangible assets, notably brands and networks, these companies have high and stable returns on operating capital & can be sustained for the long term.
Question 7:
Fisher style screens would be
• Revenue growth: ≥ Industry CAGR with no decelaration over 5–10 years
• R&D intensity: consistently above industry median
• Gross margin: improving over 5+ years, Operating margin: trending upward
• ROIC (Return on Invested Capital): ≥ 15% and above cost of capital
• Growing Market share: Ideally Top 3 in industry or niche
• No Equity dilution or limited new issuance
• Employee satisfaction proxy: Industry eg:- Glassdoor rating ≥ 4.0/5
Question 8:
Trent (India), part of the Tata Group, operates Westside and Zudio as core formats in lifestyle retail, has a strong foothold across mid-market and value fashion—two of India’s fastest-growing retail segments. Its scale, brand architecture, and execution discipline make it a compelling fit with Fisher’s emphasis on durable growth, management quality, and market leadership.
Max Healthcare (India) is another strong Fisher style candidate because it combines market leadership in Indian private hospitals, consistent growth, disciplined margins, and credible management. It fits several of Fisher’s 15 points like
1. Max Healthcare’s has large TAM given rising demand for private healthcare in India.
2. Management continues to expand formats and invest in advanced clinical technologies to sustain growth.
3. Its extensive hospital network and brand recognition provide a powerful sales and distribution system.
4. Profit margins are worthwhile, with management focused on sustaining efficiency and improving returns.
5. Depth of management ensures the business is not dependent on one or two individuals.Management maintains a long term outlook, reinvesting in capacity and technology rather than chasing short term gains.
Question 9:
Lack of Stability : Growth companies are often relatively small and therefore unstable, Graham warned us on this. Fisher’s approach is excellent for identifying potential compounders, but it exposes investors to instability in small growth firms and subjective judgments.
High Valuation : Once the market recognizes a company as a “Fisher style growth stock” (durable growth, strong margins, innovative management), it tends to get bid up aggressively. They have many biases including Scarcity value, Compounding narrative, Institutional crowding, Momentum effect.
To quote Steven Crist (from Michael Mauboussin’s work) in horse racing, everyone wants the obvious winner. If a horse looks strong on paper—great past performance, good trainer, favorable odds—bettors pile in. The problem is:
• The horse may indeed win, but the odds collapse because everyone sees the same thing.
• Even if you’re right, the payoff is small because the market has already priced in the horse’s strength.
Question 10:
Fisher’s style is deep, concentrated, qualitative, business focused, long term, and growth oriented. His uniqueness lies in combining scuttlebutt primary research with concentrated long term holdings
1. So as far as differences go, Fisher has much more of an emphasis on scuttlebutt. Or simply that which isn’t readily available within the financial statements. Of the financial statements it seems like Fisher would put more of an emphasis on the income and cash flows. While Graham would put much more emphasis on the balance sheet. There are further differences though in how they would interpret some of these financial statements, Fisher doesn’t really seem all that enthusiastic about the trailing five year earnings per share. He speaks of the fundamental fact that the research and growth capital expenditures are going to make the next five years very different to the past five years.
2. So it was the closing chapter of Security analysis where Graham talks about being receptive to investment ideas from any means by which they are introduced to us i.e. the newspaper, a friend, etc. etc. In comparison Fisher doesn’t seem to express that same receptivity, in his 15 points essentially he’s reducing down the data set pretty aggressively, but with good reason. I would say that I would want Graham to be my first gate, which is too say that there are a plethora of investment opportunities that may be hidden in plain sight if I’m receptive enough to see them. However, my second gate would be Fisher, which would ideally be much stricter on the type of companies that pass through. This gate would require more work because the distinguishing of maintenance capex and capex isn’t always clearly delineated in the financial statements or the shareholder letters. Sort of like Amazon in its early days when they had razor thin profit margins but if you took out growth capex it had high single digit profit margins.
3. I’d say Fisher’s margin of safety is being able to purchase a company with a strong likelihood of above average growth in the near future that isn’t yet reflected in the market price. Essentially it’s a temporal difference one looks to the past the other looks to the future.
4. It seems to me that valuation from Fisher‘s point of view, relies heavily on insight into the growth and stability of margins, the ROI on growth cap ex, as well as the company’s capacity to expand into new markets or new products, thus increasing sales.
5. In looking over my notes, there’s really only one point that I think is worthy of special mention. It’s in regard to point 7: the paragraph that begins “nevertheless, beyond these general figures there are a few specific details the investor might notice...” Before I became interested in investing, when I was still developing marketable skills I always felt like companies that took care of their employees as well as they try to cater to customers, in general seem to do better than companies that treat their employees as expendable. Fisher puts it in such a way that he emphasizes sacrificing some small degree of margin to maintain good labor relations (union or not.). Ultimately, I emphatically believe in this point because I think it is an expression of thinking long-term rather than short term. It may be the company’s brand, it may be the product that a customer is seeking, but ultimately it’s the efforts of the staff that actually keep a business running day by day.
6. Leaning on my previous answer, my top three would be: 7, 9 and 10. Seven I’ve already explained. Number nine is a bit of a variation on the same thing. When management is a one-man show, that’s essentially the same issue as 7 but contained to the C suite. Obviously every company needs leadership who are ultimately responsible to make the final call, however a certain degree of democratic ideals colors my perception of this. Finally, I think 9 makes a good point. It’s absolutely necessary to keep good books in order to develop insight from those books which can help increase the precision of a company‘s capital allocation strategies.
7. I think in order to really generate candidates from a Fisher point of view I’d probably start by thinking of it in terms of sectors. Trying to determine what sector has the capacity for innovation, then trying to determine which companies within that sector have a high likelihood of success of innovation. Finally, then determining the individual characteristics of that company to consider whether it would become a worthwhile investment.
8. -
9. Ultimately, I think Fisher is very optimistic, maybe not to a point of fault but certainly to a point that necessitates a dose of caution.
10. Deeply researched, highly concentrated