Fisher's Fifteen Points and Scuttlebutt Method
Find outstanding growth stocks by investigating what competitors, customers, and suppliers really think
Fisher's investment framework consists of two interlocking components: the Fifteen Points and the Scuttlebutt method. The Fifteen Points are a comprehensive checklist of qualitative characteristics that define an outstanding growth company. They cover product and market potential, research and development effectiveness, sales force strength, profit margins, management quality and integrity, labor relations, cost controls, and the company's commitment to continued growth far beyond current products. The Scuttlebutt method is the investigative technique for evaluating these points. Rather than relying on Wall Street analysts or company management alone, Fisher advocates gathering intelligence from competitors, customers, suppliers, former employees, and industry experts. The genius of combining these two elements is that the Fifteen Points tell you what to look for, while Scuttlebutt tells you how to verify it. A company that passes the Fifteen Points via genuine Scuttlebutt research is one where competitors fear it, customers love it, suppliers respect it, and management acts with integrity. Such companies are virtually impossible to fake. Fisher's son Kenneth notes that not a single scandal stock of the 2000-2002 bear market, including Enron, Tyco, and WorldCom, could have passed even half the Fifteen Points if investigated through proper Scuttlebutt, because their competitors were not scared of them, their customers were not impressed, and their suppliers saw no real sales volume.
- The most important information about a company comes from its competitors, customers, and suppliers, not from Wall Street
- If you figure out the right things to buy, selling becomes far less important because you can hold your stocks much longer
- The Fifteen Points describe fundamental business features that cannot be faked
- Scuttlebutt means avoiding gossip mills and seeking information from people with a vested interest in seeing the company clearly
- The craft of qualitative research takes time to learn but, once mastered, works for growth stocks, value stocks, and any market capitalization
- An above-average sales organization and genuine profit margins are two of the most reliable indicators of business quality
- Identify a Promising CompanyBegin by finding companies with products or services that have significant market potential, ideally with enough room to grow sales meaningfully for several years. The company should have management that is determined to continue developing new products and markets beyond the current generation. Look for firms where revenue growth is not dependent on a single product cycle but is driven by a culture of innovation and market expansion. This initial screening can come from industry observation, trade publications, or referrals from knowledgeable investors.Pro tipThe best initial leads often come from other smart investors or industry insiders who mention companies that impressed them. Fisher himself got many of his best ideas through conversations at industry events.WarningDo not skip this screening step and jump straight to Scuttlebutt. Investigating mediocre companies wastes the social capital you build with your intelligence sources.
- Conduct Scuttlebutt ResearchGather intelligence about the company from Main Street sources rather than Wall Street. Talk to the company's competitors: are they genuinely scared of this firm, or do they dismiss it? Talk to customers: are they deeply impressed by the products and service, or merely satisfied? Talk to suppliers: do they see real sales volume flowing through this company? Talk to former employees: do they speak well of the culture and management? Talk to the company's own sales representatives and research staff. The key insight is that these sources have a vested interest in seeing the company realistically. Competitors have every reason to be negative, so when they express respect or fear, that signal is extremely reliable.Pro tipThe scuttlebutt chapter in Fisher's book is only three pages long but contains the most important methodology in the entire book. Master the art of asking open-ended questions that let your sources reveal what they actually think.WarningMost people who try Scuttlebutt give up too quickly because their early attempts feel awkward. Like any craft, it takes practice and repeated application before the quality of intelligence improves.
- Evaluate Against the Fifteen PointsScore the company against all fifteen qualitative criteria: (1) products with sufficient market potential for years of growth, (2) management determination to develop new products, (3) effective R&D relative to company size, (4) an above-average sales organization, (5) a worthwhile profit margin, (6) concrete actions to maintain or improve profit margins, (7) outstanding labor and personnel relations, (8) outstanding executive relations, (9) depth in management, (10) good cost accounting and financial controls, (11) aspects of the business peculiar to the industry that give important clues to competitive superiority, (12) a short-range or long-range outlook on profits, (13) foreseeable equity financing that would dilute existing shareholders, (14) management willingness to talk freely about difficulties, and (15) management of unquestionable integrity.Pro tipNo company will score perfectly on all fifteen points. The key is that no company should score badly on more than two or three, and points 14 and 15 about management candor and integrity are non-negotiable.
- Decide When to Buy and When Not to SellOnce a company passes the Fifteen Points through Scuttlebutt verification, buy at a reasonable price and plan to hold for many years. Fisher was famously against frequent trading, arguing that the really big money is made by holding outstanding companies through market cycles rather than trying to time entries and exits. The decision to sell should be driven by fundamental deterioration of the business, not by market price movements, macro fears, or short-term earnings misses. If the Fifteen Points still hold, the stock should be held.Pro tipFisher's son Kenneth describes how he bought the same stock, Nucor, as a value investor while his father bought it as a growth investor, using the same Fifteen Points. Both made enormous profits, proving the framework works across investment styles.WarningDo not sell a great company because you think the market is going to decline. Market timing attempts destroy returns far more often than they protect them.
In 1976, Kenneth Fisher discovered Nucor, a tiny low-cost steel company with great management, innovative production technology, lower relative costs, growing market share in small niches, and an expanding addressable market. He bought it as a value investor because the stock was cheap relative to its quality. His father Philip also bought Nucor, but as a growth investor seeing the long runway of expansion. Both used the same Fifteen Points and Scuttlebutt methodology to verify the company's strengths, but applied them to different investment philosophies.
During the dot-com bust and corporate scandal era, companies like Enron, Tyco, WorldCom, and dozens of tech stocks that lost 95 percent or more of their value devastated investors. Kenneth Fisher argues that not a single one of these companies could have passed even half of the Fifteen Points through proper Scuttlebutt research. Their competitors were not afraid of them. Their customers were not deeply impressed. Their suppliers did not see real sales volume. They had no genuine sales force, no real profit margins, no sustainable R&D, and in many cases no path to profitability at all.
Philip Fisher developed this approach over decades of investment practice starting in the 1930s and 1940s. The method crystallized through hard experience: his son Kenneth describes how, as a young man fresh from college, he tried to apply the Fifteen Points to a local lumber stock but failed because he did not yet know how to conduct proper Scuttlebutt. The craft of asking the right questions of the right people took years to learn. Fisher eventually built a legendary track record by holding a concentrated portfolio of outstanding companies for very long periods. The book, published in 1958, was the first investment book to reach the New York Times bestseller list and has remained continuously in print for over six decades. Warren Buffett has credited Fisher as a major influence, saying he is '85 percent Benjamin Graham and 15 percent Phil Fisher.'