Scuttlebutt: The Questions That Matter

"If the job has been done correctly when a stock is purchased, the time to sell it is almost never." — Philip Fisher

Philip Fisher pioneered a research method he called "scuttlebutt" — talking to a company's competitors, suppliers, customers and former employees to build a mosaic of its true competitive position before trusting a single figure in its accounts.

His questions span three areas:

• Business quality — does the company have products with real room to grow? Is its research pipeline strong for its size? Is the sales organisation effective? Are margins healthy, and what is being done to protect or improve them?
• Management quality — does management have depth and a succession plan? Does it communicate openly, including about problems? Does it have unquestioned integrity?
• Investment merit — are labour relations good? Does management sacrifice some of today's profit for tomorrow's growth? Will the company need to issue new shares in a way that dilutes existing owners?

Fisher's insight was that a business scoring well across all these questions should almost never be sold — the trajectory of the business matters far more than short-term moves in its share price.

Illustrative example: holding for decades

Fisher famously bought one technology company in the 1950s, satisfied himself on every one of his questions, and held it for decades — never finding a reason to sell. The long holding period, made possible by thorough upfront work, was itself the source of the return.