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Why Investing Guru Phil Fisher Says You Should NOT "Buy Low, Sell High" - YouTube
Channel: The Motley Fool
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David Gardner: Great Quotation No. 2: This one
comes from one of my favorite investment writers.
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An investor who wrote a great book.
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I was thinking about him recently [today]
having not thought about him in some years
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because I was saying hello to
Nick Sciple. Nick is a new Fool.
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I have a new Fool coffee with every one of
our new Fools who come through Fool HQ.
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I've done that for a couple of decades.
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It's always a pleasure to see our new employees
and what they're doing to help our cause to
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make the world smarter,
happier, and richer.
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And for some of you who listen to Motley Fool
podcasts, you'll recognize that Nick does
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an Industry Focus podcast recently
having taken over the microphone.
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He's a new Fool but one who has more exposure
than most Fools because he's a podcaster.
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Nick was [talking] to me today
[about] Phil Fisher who wrote a great book,
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It turns out the year was 1958.
I double-checked my math, here.
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Common Stocks and
Uncommon Profits and it's a classic.
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Nick said to me, "You know, a lot of what
he says in there is how you and we invest
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at The Motley Fool.
We might think we're doing The Fool thing.
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That we're radical and doing a new thing.
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A lot of how we think about things, like the
best time to sell is never and those kinds
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of lines -- a lot of those derive from Fisher."
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And I said to Nick, "First of all,
thanks for reminding me of that, because of the few
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investment books I've read in my lifetime,
one of them that I did read is Phil Fisher's
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book and I thought it was excellent."
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So before I give his quote, here,
for Great Quotation No. 2, I'm going to say that dear Fool,
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if you've never read Common Stocks and
Uncommon Profits, I highly recommend you do so.
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Yes, it may read a bit dated, because it was
written before the internet; yup, about 40 years
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before the internet showed up, but it
really contains so much good thinking that
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feels fresh and like it was written yesterday.
Anyway, here's Great Quotation, No. 2.
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Great Quotation No. 2: "Finding the really
outstanding companies and staying with them
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through all the fluctuations of a gyrating
market proved far more profitable to far more people
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than did the more colorful practice
of trying to buy them cheap and sell them dear."
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That's Fisher -- one of his writings,
a great quotation -- reminding us that it is, in fact,
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as the old saw goes, time in the
market and not timing the market.
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That's not a Fisher saw.
That's just an old investment phrase.
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But that's the way to win.
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So I'm obviously keying back to
Great Quotation No. 1, "Exit, pursued by a bear,"
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encouraging you not to exit because again,
with Phil Fisher, "Finding the really outstanding
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companies and staying with them through all the
fluctuations of a gyrating market proved far more
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profitable to far more people."
I don't think I need to say a lot more about this.
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I think it speaks for itself.
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It kind of keys to my first quotation,
and it's one of our primary points that I've made
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on this podcast for a few years, now,
and that Fool.com and so many of our writers, advisors,
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and analysts have made
that point for a few decades.
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I do want to say, before I move onto
Great Quotation No. 3, what other investment books
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I would recommend or I have enjoyed, and I mentioned
earlier that I haven't really read that many.
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I don't typically find investing
books that interesting to read.
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I did read, How to Read a Financial Report.
I believe that's by John Tracy.
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And since I was an undergrad English major,
and I never took an accounting course,
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as I graduated college already a stock
market investor, I thought, "You know, I should get
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a better handle on financial statements."
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That was a great way for me of uniting my
understanding of what's on an income statement,
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which is basically showing the
profits of a company [or losses].
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And then second what's on a balance sheet,
which is basically the bank account for that company.
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And then finally the cash flow statement,
which is kind of like looking at cash in and
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cash out from that bank account.
Like what you're spending on a daily basis.
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So those three financial statements --
the income statement, the balance sheet,
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and the statement of cash flows -- that's a wonderful
book to understand how they work together.
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It speaks to sort of a fifth-grade math level;
things like addition, subtraction, division,
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and multiplication which is about
as complicated as I like my math to get.
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And by the way, I really do like math.
I think we should all like math.
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But that book stays right there with us and
I think can really help anybody get a better grip
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on financial statements,
so I definitely want to mention that one.
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Of course, I want to mention Peter Lynch's book,
One Up on Wall Street, which was formative for me.
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This was written about 30 years ago, so while
many of the companies that he's writing about
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will sound like old-time companies
that you may not have heard of anymore;
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again, the lessons and his wonderful wit comes
through and helps all of us as investors.
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He also wrote, Beating the Street as a follow-up.
That's another book that I've read.
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I'll mention three other books really quickly. One is
William O'Neil's book, How to Make Money in Stocks.
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I've said it's both some of the greatest and
some of the worst writing that I've ever seen
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in a single book to help and hurt investors.
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Where I think O'Neil is brilliant -- O'Neil,
by the way, the founder of Investor's Business Daily,
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a publication I've certainly appreciated
over the course of my life -- where he has
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it nailed is he looks at studies that show
what the great stocks are of an era,
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and he looks at the traits
that lead to those stocks.
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And in many cases he
teaches us contrary things.
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So when I first read, How to Make Money in
Stocks by William O'Neil, I was probably more
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focused on 52-week lows as the time
that I would start to look to buy a stock.
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Like the stock is at a low, so I should be more interested,
I thought, in the stock because of that reason.
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But in fact O'Neil shows through studies,
and some really good writing, that you should
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be looking at 52-week highs because [this is one
of my themes for 2018 on this podcast] “winners win!”
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What do winners do? That's right. They win.
And, as it turns out, that's often true of stocks.
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So stocks at 52-week highs typically go on
to make more highs and new highs in the coming
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months or years vs. stocks that are bouncing
around from low to high and back to low again.
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So I like to find companies that grow and
I'm happy to pay for them when they're at
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their 52-week high.
That's what O'Neil convinced me.
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However, a lot of his book includes advice
about trying to time the market and guessing
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where the market's going.
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I hope you didn't take me too seriously, earlier,
when I said I thought we might be in the fourth month
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of a bear market because first of all,
I don't care that much about it.
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I'm going to be invested anyway.
And second, I really don't know.
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But I think O'Neil tries to persuade you that
you can know, and he uses a whole bunch of
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different metrics that, taken together,
read confusingly to me.
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There's too many different ways or indicators
of figuring out where the market's headed.
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He also advises [and I think this is really
bad advice] to never take a big loss.
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So if a stock drops 7%, he's often said and
written in the past you should just exit that
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regardless of the research that you did,
or what you believe in the company because
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you want to avoid those losses.
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And I hope I've demonstrated through my work
at The Motley Fool and through this podcast
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that taking losses is fine. It's natural
and in a lot of ways I say we need to lose to win.
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I'm not going to belabor that point
here because I've made it elsewhere.
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The last two books
I want to mention quickly.
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Benjamin Graham's book,
The Intelligent Investor;
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Benjamin Graham, of course,
the great influence on Warren Buffett.
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I read about half of that book as a young
man and I just didn't keep reading it.
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I found it pretty boring, backward looking, and its
methodologies around valuation while interesting,
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never compelled me.
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And in a lot of ways, Rule Breaker Investing succeeds
because a lot of other people follow Benjamin Graham.
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And I can't not mention Jack Bogle,
one of my personal heroes.
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It's somebody that I've
had on this podcast before.
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I've never really read any
of Bogle's investment books.
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I'm not a huge index fund fan, even though
we, here, at The Motley Fool have turned
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many people onto index funds as a better answer
to the mutual funds that they owned before
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the simplicity and low cost
of a good index fund.
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But what I love Bogle for is his emphasis
on character and his thinking about business.
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So a book like, Enough, while not really an
investment book I thought I should mention briefly, here.
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I'm not giving you my Mount Rushmore of investing
books because I really haven't read enough
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ever to be able to sort through
and have a grand Mount Rushmore.
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In closing on this one, I find myself reading
books often about business, not about investing.
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Or about culture, or life, or technology, or the future;
again, as opposed to reading investing books.
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I'm sure your mileage may well vary.
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We're all different, but I'm just sharing
out how I think about these things.
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