Foreword
The publication of a new book in the field of investment may well require some explanatory statement from its author. The following remarks will therefore have to be somewhat personal in order to supply an adequate explanation for my venturing to offer another book on this subject to the investing public.
After one year in Stanford University’s then brand-new Graduate School of Business Administration, I entered the business world in May 1028. I went to work for, and twenty months later was made the head of, the statistical department of one of the main constituent units of the present Crocker-Anglo National Bank of San Francisco. Under today’s nomenclature I would have been called a security analyst.
Here I had a ringside seat at the incredible financial orgy that culminated in the autumn of 1929 as well as the period of adversity that followed. My observations led me to believe that there was a magnificent opportunity on the West Coast for a specialized investment counseling firm that would make itself the direct antithesis of that ancient but uncomplimentary description of certain stockbrokers – men who know the price of everything and the value of nothing.
On March first 1931, I started Fisher & Co. which, at that time was an investment counseling business serving the general public but with its interests centered largely around a few growth companies. This activity prospered. Then came World War II. For three and a half years, while I was engaged in various desk jobs for the Army Air Force, I spent part of such spare time as I had in reviewing both the successful and, more particularly, the unsuccessful investment actions that I had taken and that I had seen others take during the preceding ten years. I began seeing certain investment principles emerge from this review which were different from some of those commonly accepted as gospel in the financial community.
When I returned to civilian life, I decided to put these principles into practice in a business atmosphere as little disturbed by side issues as possible. Instead of serving the general public, Fisher & Co. for over eleven years has never served more than a dozen clients at one time. Most of these clients have remained the same during this period. Instead of being mainly interested in major capital appreciation, all Fisher & Co. activity has been focused upon this one objective. I am aware that these past eleven years have been a period of generally rising stock prices during which anyone engaged in such activities should have made good profits. Nevertheless by the degree to which these funds have consistently forged ahead of the generally recognized indices of the market as a whole, I find that following these principles has justified itself even more thoroughly in the postwar period that was the case in the ten prewar years when I was only partially applying them. Perhaps even more significant, they have been no less rewarding during those of these years when the general market was static or declining than when it was sharply advancing.
In studying the investment record both of myself and others, two matters were significant influences in causing this book to be written. One, which I mention several times elsewhere, is the need for patience if big profits are to be made from investment. Put another way, it is often easier to tell what will happen to the price of a stock than how much time will elapse before it happens. The other is the inherently deceptive nature of the stock market. Doing what everebody else is doing at the moment, and therefore what you have an almost irresistible urge to do, is often the wrong thing to do at all.
For these reasons over the years I have found myself explaining in great detail to the owners of the funds I manage the principles behind one or another action I have taken. Only in this way would they have enough understanding of why I was acquiring some, to them, totally unknown security so that there would be no impulse to dispose of it before enough time had elapsed for the purchase to begin justifying itself in market quotations.
Gradually the desire arose to compile these investment principles and have a printed record to which I could point. This resulted in the first groping toward organizing this book. Then I began thinking of the many people, most of them owners of far smaller funds than those belonging to the handful of individuals it is my business to serve, who have come to me over the years and asked how they as small investors could get started off on the right path.
I thought of the difficulties of the army of small investors who have unintentionally picked up all sorts of ideas and investment notions that can prove expensive over a period of years, possibly because they had never been exposed to the challenge of more fundamental concepts. Finally I thought of the many discussions I have had with another group also vitally interested in these matters, although from a different stand point. These are the corporate presidents, financial vice presidents and treasurers of publicly owned companies, many of whom show a deep interest in learning as much as possible about these matters.
I concluded there was need for a book of this sort. I decided such a book would have an informal presentation in which I would try to address you, the reader, in the first person. I would use much the same language and many of the same examples and analogies that I have employed in presenting the same concepts to those whose funds I manage. I hope my frankness, at times my bluntness, will not cause offense. I particularly hope that you will conclude the merit of the ideas I present may outweigh my defects as a writer.
PHILIP A. FISHER
San Mateo, California
September 1957
After one year in Stanford University’s then brand-new Graduate School of Business Administration, I entered the business world in May 1028. I went to work for, and twenty months later was made the head of, the statistical department of one of the main constituent units of the present Crocker-Anglo National Bank of San Francisco. Under today’s nomenclature I would have been called a security analyst.
Here I had a ringside seat at the incredible financial orgy that culminated in the autumn of 1929 as well as the period of adversity that followed. My observations led me to believe that there was a magnificent opportunity on the West Coast for a specialized investment counseling firm that would make itself the direct antithesis of that ancient but uncomplimentary description of certain stockbrokers – men who know the price of everything and the value of nothing.
On March first 1931, I started Fisher & Co. which, at that time was an investment counseling business serving the general public but with its interests centered largely around a few growth companies. This activity prospered. Then came World War II. For three and a half years, while I was engaged in various desk jobs for the Army Air Force, I spent part of such spare time as I had in reviewing both the successful and, more particularly, the unsuccessful investment actions that I had taken and that I had seen others take during the preceding ten years. I began seeing certain investment principles emerge from this review which were different from some of those commonly accepted as gospel in the financial community.
When I returned to civilian life, I decided to put these principles into practice in a business atmosphere as little disturbed by side issues as possible. Instead of serving the general public, Fisher & Co. for over eleven years has never served more than a dozen clients at one time. Most of these clients have remained the same during this period. Instead of being mainly interested in major capital appreciation, all Fisher & Co. activity has been focused upon this one objective. I am aware that these past eleven years have been a period of generally rising stock prices during which anyone engaged in such activities should have made good profits. Nevertheless by the degree to which these funds have consistently forged ahead of the generally recognized indices of the market as a whole, I find that following these principles has justified itself even more thoroughly in the postwar period that was the case in the ten prewar years when I was only partially applying them. Perhaps even more significant, they have been no less rewarding during those of these years when the general market was static or declining than when it was sharply advancing.
In studying the investment record both of myself and others, two matters were significant influences in causing this book to be written. One, which I mention several times elsewhere, is the need for patience if big profits are to be made from investment. Put another way, it is often easier to tell what will happen to the price of a stock than how much time will elapse before it happens. The other is the inherently deceptive nature of the stock market. Doing what everebody else is doing at the moment, and therefore what you have an almost irresistible urge to do, is often the wrong thing to do at all.
For these reasons over the years I have found myself explaining in great detail to the owners of the funds I manage the principles behind one or another action I have taken. Only in this way would they have enough understanding of why I was acquiring some, to them, totally unknown security so that there would be no impulse to dispose of it before enough time had elapsed for the purchase to begin justifying itself in market quotations.
Gradually the desire arose to compile these investment principles and have a printed record to which I could point. This resulted in the first groping toward organizing this book. Then I began thinking of the many people, most of them owners of far smaller funds than those belonging to the handful of individuals it is my business to serve, who have come to me over the years and asked how they as small investors could get started off on the right path.
I thought of the difficulties of the army of small investors who have unintentionally picked up all sorts of ideas and investment notions that can prove expensive over a period of years, possibly because they had never been exposed to the challenge of more fundamental concepts. Finally I thought of the many discussions I have had with another group also vitally interested in these matters, although from a different stand point. These are the corporate presidents, financial vice presidents and treasurers of publicly owned companies, many of whom show a deep interest in learning as much as possible about these matters.
I concluded there was need for a book of this sort. I decided such a book would have an informal presentation in which I would try to address you, the reader, in the first person. I would use much the same language and many of the same examples and analogies that I have employed in presenting the same concepts to those whose funds I manage. I hope my frankness, at times my bluntness, will not cause offense. I particularly hope that you will conclude the merit of the ideas I present may outweigh my defects as a writer.
PHILIP A. FISHER
San Mateo, California
September 1957
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