Four growth stocks that may have caught Philip Fisher's eye

Monday, Nov 05 2012 by
6
Four growth stocks that may have caught Philip Fishers eye

When Philip Fisher wrote Common Stocks and Uncommon Profits in 1958, he documented a now famous approach to growth investing. His focus on robust management and strong company growth prospects has proved to be a lucrative blend. It has also proved an inspiration to his peers, including Warren Buffett. Fisher’s legacy is a powerful approach that continues to produce strong stockmarket returns. So far in 2012 Stockopedia’s interpretation of his strategy has been among the best performing growth investing screens, with a 24.8% return versus 9.4% for the FTSE 100. According to AAII, stocks passing their interpretation of the Fisher screen tracked between January 1998 and August 2008, produced an astonishing cumulative return of 133.5%, versus 32.2% for the S&P 500. 

Recently we took a closer look at how Fisher’s approach to growth investing works. At its heart is a 15-point list of demanding buy criteria that mixes quantitative and qualitative analysis with a focus on exploring each stock’s potential to grow. In his book, Fisher insisted that the best time to sell a stock that had met these criteria was “almost never” provided the investor’s assessment of the company was accurate. 

Management integrity & growth characteristics 

Fisher's whole approach is based on the idea of “scuttlebutt”, or looking beyond simple financial statements to pull together all sorts of information about a stock in order to get a detailed view of it. The points he looked for can be split up into two categories: 

1. Management Qualities - He looked for depth, integrity, transparency, a long-term outlook, good staff relations and excellent financial controls. 

2. Business Characteristics - He looked for business characteristics that would support sustainable growth, namely a strong sales function, products or services with sufficient market potential, a commitment to ongoing product development through R&D and outstanding competitive positioning.  

He was also most comfortable when investing in large manufacturing companies that had a scientific element to them. 

Spirit of Fisher 

As with any quant screen approach, Stockopedia’s version of the Fisher screen inevitably has a numerical bias, focusing on key growth and quality ratios like sales growth, high margins and a compelling price/earnings growth rate (PEG). There are currently 22 stocks on the screen from a broad range of sectors. 

However, Fisher was not simply a ‘paint by numbers’…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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The Weir Group PLC is engaged in engineering businesses. The Company operates through three segments: Minerals, Oil & Gas, and Power & Industrial. The Minerals segment is engaged in the provision of slurry handling equipment and associated aftermarket support for abrasive high wear applications used in the mining and oil sands markets. The Oil & Gas segment provides products and service solutions to upstream, production, transportation, refining and related industries. The Power & Industrial segment designs and manufactures valves, pumps and turbines, and provides specialist support services to the power generation, industrial, and oil and gas sectors. Its brands include Warman, GEHO, Linatex, Vulco, Cavex, Enduron, Trio, SPM, Seaboard, Mathena, Novatech, Gabbioneta, Hopkinsons, Atwood & Morrill, Sarasin-RBSD and Blakeborough. more »

LSE Price
1840p
Change
-0.2%
Mkt Cap (£m)
4,006
P/E (fwd)
22.8
Yield (fwd)
2.4

BTG plc is engaged in the business of healthcare, focusing on Interventional Medicine therapies for liver cancer, emphysema and vascular disorders, specialty pharmaceuticals for acute care uses, and a licensing business. The Company operates through three segments: Interventional Medicine, Specialty Pharmaceuticals and Licensing. The Interventional Medicine segment includes oncology, vascular and pulmonology. The segment's products include Beads, TheraSphere, EkoSonic, Varithena and PneumRx Coils for use in the treatment of liver tumors, blood clots, varicose veins and advanced emphysema. The Specialty Pharmaceuticals segment includes CroFab, DigiFab, Voraxaze and Vistogard products for use in the treatment of crotalid envenomation, digoxin toxicity, high-dose methotrexate toxicity and 5-fluorouracil toxicity. The Licensing segment includes Zytiga, Two-Part Hip Cup and Lemtrada products for use in the treatment of advanced prostate cancer, hip replacement and multiple sclerosis. more »

LSE Price
575.5p
Change
3.3%
Mkt Cap (£m)
2,216
P/E (fwd)
19.6
Yield (fwd)
n/a

Petrofac Limited is an international service provider to the oil and gas production and processing industry. The Company designs, builds, operates and maintains oil and gas facilities, delivered through a range of commercial models, enabling it to respond to the distinct needs of each client and enabling them to manage their assets across the oil and gas life cycle. The Company operates through three segments: Engineering & Construction, Engineering & Production Services, and Integrated Energy Services (IES) business. The Engineering & Construction segment includes its lump-sum activities onshore and offshore. The Engineering & Production Services segment includes all of its reimbursable engineering and production services activities. The Integrated Energy Services business is focused on delivering value from the Company's existing IES asset portfolio. The Company has a diverse customer portfolio, including various integrated, independent and national oil and gas companies. more »

LSE Price
870p
Change
3.8%
Mkt Cap (£m)
2,957
P/E (fwd)
9.4
Yield (fwd)
5.9



  Is Weir fundamentally strong or weak? Find out More »


2 Comments on this Article show/hide all

StrollingMolby 6th Nov '12 1 of 2
1

Interesting to note that Weir (LON:WEIR) is the most shorted UK share (by aggregate disclosable positions) in today's FSA's short selling spreadsheet, at 9.06% of shares in issue. What are the hedgies seeing that the Fisher screen is not?

http://boards.fool.co.uk/short-positions-first-fsa-list-12677587.aspx

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Ben Hobson 8th Nov '12 2 of 2

Decent interim results from BTG - highest riser in the FTSE 250 today, up 7.57%

Investment Research: Stockopedia
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About Ben Hobson

Ben Hobson

Strategies Editor at Stockopedia. My goal is to help private investors learn and invest with confidence through the articles, ebooks and other resources we publish on site. I also occasionally bunk off to interview famous investors at expensive restaurants. I studied History at Aberystwyth University, trained as a journalist and covered business news and corporate finance before settling in as one of the first staff members at Stockopedia.  Away from Stockopedia I'm a mountain bike junkie. more »

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