Who was Philip Fisher?
The Fisher (Philip) Screen is built on the growth-investing philosophy of Philip A. Fisher (1907–2004), not his son Ken Fisher of Fisher Investments. Philip Fisher started in 1928 as a "statistician" at a San Francisco bank, lost money in the 1929 crash, and founded his own firm, Fisher & Company, in 1931 — running it into his nineties. He set out his approach in Common Stocks and Uncommon Profits (1958), one of the first serious books devoted to buying growth rather than cheapness. Fisher is remembered for the "scuttlebutt" method — gathering intelligence from a company's customers, suppliers, competitors, and former employees — and for holding outstanding businesses for decades. He bought Motorola in 1955 and held it until his death nearly fifty years later.
The core idea: quality growth, bought well
Fisher rejected the notion that the largest returns come from cheap stocks. A stock undervalued by 50% only doubles once it reaches fair value; a company that compounds sales and profits faster than its industry for a decade can return many times that. So he hunted for a small number of genuinely superior businesses — durable competitive advantages, above-average margins, heavy and effective research, and management with both the ambition and the discipline to keep growing — and judged them against his fifteen points. The catch was price. Fisher wanted these companies when the market had temporarily misjudged them or when the broad market was depressed, not at any multiple.
The screen turns that philosophy into measurable filters: net profit margin above the industry median, sales growth that is both consistent and faster than peers, no dividend (so profits are reinvested), and a PEG ratio — forward price-earnings divided by the estimated long-term earnings growth rate — of no more than one half.
What the Fisher (Philip) Screen looks for
- Over-the-counter (OTC) stocks are excluded.
- Net profit margin above the industry median for the trailing 12 months and for each of the last five fiscal years — a sustained margin edge, not a single good year.
- Sales higher than the prior year in each of the last three fiscal years, and the trailing 12 months above the most recent fiscal year.
- Three-year sales growth rate at or above the industry median, evidence the company is taking share rather than just riding its market.
- No dividend expected over the next year (indicated dividend of zero), so earnings are plowed back into growth.
- PEG ratio above 0.1 and no higher than 0.5 — paying at most half the growth rate, with the lower bound filtering out data anomalies.
Why the approach can work
A profit margin that stays above the industry year after year is hard to fake and hard to sustain without some real advantage — a low-cost position, a patent, a brand, a distribution lock. Fisher compared a fat margin to an open jar of honey that draws a swarm of competitors; the companies that keep the swarm off usually have a moat worth owning. Pairing that quality test with a PEG ceiling of 0.5 is the discipline that kept Fisher from overpaying for a good story. Warren Buffett, who described himself as "85% Graham and 15% Fisher," credited Fisher's scuttlebutt work and his emphasis on business quality with shaping how he thinks about durable franchises.
What to keep in mind
The screen is only the first filter Fisher would have run. His real edge came from the qualitative fifteen points and the scuttlebutt legwork behind them, none of which a ratio can reproduce. Growth screens also tend to surface richly-valued, narrative-driven names, and past margins and sales growth are backward-looking — both can mean-revert once competition arrives. The PEG test leans on analyst growth estimates, which run optimistic. And Fisher's method demanded conviction: he held few stocks, concentrated, and sat through drawdowns for years. A list of tickers cannot supply that conviction; the homework behind each name has to.
Sources
Common Stocks and Uncommon Profits, Philip A. Fisher, Harper & Brothers, 1958 — reissued with his later essays as Common Stocks and Uncommon Profits and Other Writings, John Wiley & Sons.
American Association of Individual Investors (AAII) — Stock Investor Pro screen definition and commentary.