Warren Buffett is generally considered to be a value investor in the mould of Benjamin Graham, and certainly he started out that way, but these days he’s no longer a true value investor and is much more in the vain of Philip Fisher. A quote attributed to Buffett is that he’s “85% Benjamin Graham and 15% Phil Fisher”; but that quote is old and I think he has shifted towards Fisher and away from Graham. In other words, away from value investing and towards Fisher’s core principles of growth investing.
It was first published in 1958, nine years after The Intelligent Investor, with the latter being the bible for value investing. Fisher and his book Common Stocks and Uncommon Profits is the growth strategy bible of investing. Between these two books we have the two major investing themes that drive markets.
Growth investing is simple enough; buy companies that are growing within growing industries. How hard can that be? The problem is that we keep on falling into traps and this book will help you avoid the traps.
Issues covered include fifteen points to look for in a company worth investing in and ten pitfalls for investors to avoid doing (avoiding is as important as doing). Perhaps most importantly, he’s prepared to pay top price for a great company that meets his requirements, taking the view that greatness is never cheap and it can continue to grow its value.
One of the criticisms of the book is that some of the ideas are simply not practical for the private investor. For example he suggests asking whether, “the management have a determination to continue to develop products or processes”, which is something that is hard for the private investor, without access to management, to determine.
That said, there is still a ton of value in his clear and simplified thinking that every investor can learn from and certainly it helped me understand markets and stock selection.