Philip Fisher's 15 Points to Look for in a Common Stock
Philip Fisher's 15 points are a checklist of questions for finding outstanding growth companies, covering sales potential, profit margins, research, people and, above all, management integrity. He published them in 1958 in Common Stocks and Uncommon Profits. Below you will find all 15 points in Fisher's own words, what each one means today, and how to research them as an individual investor.
Where this fits: Fisher's points feed Criterion 1 (great business) and especially Criterion 3 (aligned management) of the Five Criteria. This article is part of our Learning from the Masters series.
Who Was Philip Fisher?
Philip Fisher was born in San Francisco on 8 September 1907. He left the new Stanford Graduate School of Business in 1928 to work as a securities analyst, then founded his own firm, Fisher & Co., in 1931. He managed money for clients for most of the rest of his life, retiring in 1999, and died in 2004 aged 96.
His best-known investment was Motorola, which he bought in 1955 when it was mainly a radio maker and held until his death. His first book, Common Stocks and Uncommon Profits, came out in 1958 and is still in print. Warren Buffett is widely reported to have described himself in the late 1960s as roughly 85% Benjamin Graham and 15% Philip Fisher.
Fisher's method was the opposite of Graham's in one key way. Graham looked for statistically cheap stocks and diversified widely. Fisher looked for a small number of exceptional companies that could grow for decades, then held them.
The Philip Fisher 15 Points, in His Own Words
Fisher framed each point as a question. Here they are in his original order and wording.
Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?
How effective are the company's research and development efforts in relation to its size?
Does the company have an above-average sales organization?
Does the company have a worthwhile profit margin?
What is the company doing to maintain or improve profit margins?
Does the company have outstanding labor and personnel relations?
Does the company have outstanding executive relations?
Does the company have depth to its management?
How good are the company's cost analysis and accounting controls?
Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?
Does the company have a short-range or long-range outlook in regard to profits?
In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders' benefit from this anticipated growth?
Does the management talk freely to investors about its affairs when things are going well but "clam up" when troubles and disappointments occur?
Does the company have a management of unquestionable integrity?
The list looks long, but it falls into five groups: growth runway (1 to 4), profitability (5, 6 and 10), people and culture (7 to 9), competitive edge and outlook (11 and 12), and shareholders and integrity (13 to 15).
Fisher was clear that a company could miss on a few points and still be an outstanding investment. Point 15 was the exception. If management's integrity is in doubt, he argued, nothing else can compensate.
What Each Group Means for Investors Today
Growth runway: can sales keep growing?
Points 1 to 4 ask whether the business has room to grow and the machinery to capture it. Look for a large addressable market, a track record of new products, and a sales engine that wins against rivals.
A useful modern test is whether revenue from products launched in the last five years is meaningful. Companies that rely on one ageing product line often fail point 2.
Profitability: is growth worth anything?
Fisher warned that growth without margins is not worth much. Points 5, 6 and 10 ask whether the company earns good margins, is working to protect them and actually knows where its costs come from.
Today we would add return on invested capital. High margins with heavy capital needs can still produce mediocre returns. Our ROIC guide shows how to check.
People and culture: will the team stay and deliver?
Points 7 to 9 are about employees, the executive team and succession. Signs of trouble include high staff turnover, open feuds among senior managers, and a CEO with no credible successor.
Employee review sites, LinkedIn tenure data and proxy statements make this easier than in Fisher's day. They are imperfect, so look for patterns rather than single complaints.
Competitive edge and outlook
Point 11 is Fisher's version of the economic moat. Every industry has its own clues, such as patents in pharmaceuticals or network density in logistics. Point 12 asks whether management will sacrifice this year's profit to build the business, for example by investing in customer goodwill.
For a full treatment of moats, see how to spot a competitive advantage.
Shareholders and integrity: will you share in the growth?
Point 13 is about dilution. If a company must keep issuing shares to fund growth, existing owners may see little benefit. Read stock dilution explained for how to measure it.
Points 14 and 15 are the heart of Fisher's thinking. Watch how management talks when results disappoint.
Candid explanations are a good sign. Vague language, blaming "headwinds" every quarter or quietly changing the metrics are warning signs.
Having worked in investor relations, I can confirm that point 14 remains one of the most revealing tests. The best companies I have seen explain bad news as clearly as good news. It is worth reading several years of results releases side by side to see whether the tone changes when the numbers do.
How to Research the 15 Points: Scuttlebutt
Fisher's research method was what he called "scuttlebutt", the business grapevine. He talked to customers, suppliers, competitors, former employees and industry experts. He believed they would reveal far more than the company's own reports.
You can still do a version of this:
Use the product yourself, or talk to people who buy it for work
Read industry forums, trade publications and customer reviews
Listen to earnings calls and note which questions management avoids
Read what competitors say about the market in their own reports and calls
Check former employees' comments for recurring themes, not one-off grievances
One caution: since the US Securities and Exchange Commission adopted Regulation Fair Disclosure in 2000, companies cannot give material information to selected investors. That is healthy, but it means scuttlebutt now comes mostly from outside the company, not from privileged access to executives.
A Worked Example: Scoring Company B
Here is how a simplified Fisher review might look for a hypothetical mid-sized maker of laboratory equipment, Company B. Each group is scored as strong, adequate or weak.
Fisher group | Evidence found | Score |
Growth runway (1 to 4) | Sales up 9% a year for a decade; 30% of revenue from products under five years old | Strong |
Profitability (5, 6, 10) | Operating margin steady at 22%; ROIC 18% | Strong |
People and culture (7 to 9) | Low staff turnover; two internal CEO candidates | Adequate |
Edge and outlook (11, 12) | Installed base locks in consumable sales; R&D kept up in a weak year | Strong |
Shareholders and integrity (13 to 15) | Share count down 1% a year; CEO explained a recall openly | Strong |
Company B looks like a Fisher-style business. But notice what the table does not tell you: the price. If the stock trades at a free cash flow yield of 2%, a great company can still be a poor investment.
What Fisher Got Right, and Where the Approach Struggles
What has aged well
Fisher's focus on long-term growth, management quality and holding great companies has been vindicated by many of the best long-term investment records. His famous line on selling still holds: if the job has been done correctly when a stock is bought, "the time to sell it is — almost never." Buffett later echoed this when he wrote in 1988 that Berkshire's favourite holding period is forever.
Where the approach struggles
Valuation is underplayed. The 15 points say almost nothing about price. Investors who bought excellent growth companies at extreme valuations, as many did in the early 1970s and late 1990s, often waited years just to break even.
Judgement is hard to verify. Questions like R&D effectiveness or executive relations need real industry knowledge. Beginners can easily mistake a good story for good evidence.
Scuttlebutt takes time. Fisher was a full-time professional. Most individual investors cannot interview a dozen suppliers.
Concentration cuts both ways. Fisher held relatively few stocks. That works only if your analysis is right, and it demands careful position sizing.
How We Use Fisher's 15 Points in the Five Criteria
We do not run all 15 points on every stock. We fold their intent into the Five Criteria, then add what Fisher left out.
Fisher points | Five Criteria link | House test |
1 to 6, 10 | 1. Great business | ROIC of 15% or more for 5+ years; stable or rising gross margin; FCF at least 90% of net income |
11, 12 | 2. Durable moat | Name one of five moat sources and show ROIC held through a downturn |
7 to 9, 13 to 15 | 3. Aligned management | Share count flat or falling over 5 years; meaningful insider ownership; candid reporting |
(not covered) | 4. Sound balance sheet | Net debt/EBITDA of 2.0x or less; interest coverage of 5x or more |
(not covered) | 5. Reasonable price | FCF yield of 5% or more, or at least 25% below conservative intrinsic value |
The last two rows matter. Fisher helps you find a great company. Graham's discipline on debt and price keeps you from overpaying for it.
For more on the management side, read how to identify great management before you invest.
Common Mistakes When Using the 15 Points
Treating it as a tick-box exercise. Fisher meant the points as a guide to deep research, not a form to fill in from a stock screener.
Ignoring point 15 because the numbers look great. A strong income statement cannot make up for dishonest managers.
Skipping price. A company that scores well on all 15 points can still be a bad buy at the wrong valuation.
Relying on management's own story. Fisher's whole method was to check the company's claims with outsiders.
Selling too early. Fisher's advice was to hold great companies through temporary setbacks, not to take quick profits.
Frequently Asked Questions
What book are Philip Fisher's 15 points from? They come from Chapter 3 of Common Stocks and Uncommon Profits, first published in 1958. The book also covers scuttlebutt, when to sell and common investor mistakes.
Does a stock need to pass all 15 points? No. Fisher wrote that a company could fall short on a few points and still be an outstanding investment. Integrity, point 15, is the one he treated as non-negotiable.
Is Philip Fisher a growth or value investor? He is usually described as a growth investor, because he focused on companies that could expand sales and profits for many years. His ideas on quality and management deeply influenced value investors like Warren Buffett.
What is scuttlebutt investing? It is Fisher's name for gathering information from people around a company, such as customers, suppliers, competitors and former employees, rather than relying only on company reports.
Your Next Step
Fisher teaches you what a great company looks like from the inside. To turn that into a repeatable process, start with the Five Criteria framework, then compare Fisher's ideas with Graham, Buffett and others in lessons from the greatest investors of all time. If you want a printable version of our process, see the Five Criteria investment checklist.
About the author: Cameron Hayes is a senior investor relations and finance professional who has worked in IR at Nasdaq Copenhagen-listed companies including Nilfisk and Maersk Drilling. He holds an MSc from Copenhagen Business School and a BCom from the University of Ottawa, and founded Gingernomics to teach individual investors the Five Criteria framework. More about Gingernomics.
The content on Gingernomics is for educational and informational purposes only and does not constitute financial advice. Always do your own research and consult a licensed financial advisor before making any investment decisions. Past performance is not indicative of future results.
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