The best trades in history… Philip Fisher buys Texas Instruments
Philip Fisher (born 1907) graduated from Stanford University with a degree in economics, but dropped out of the Graduate School of Business after a year to work in the then booming banking sector. In 1931 he started his own investment firm, Philip Fisher & Company, which he ran, with an interruption for military service, until his retirement 68 years later in 1999. His bestselling books Common Stocks and Uncommon Profits, Paths to Wealth Through Common Stocks and Conservative Investors Sleep Well are regarded as investing classics.
What was the trade?
In 1954 an analyst with Standard & Poor’s told Fisher about Texas Instruments, a pioneer in silicon transistors. Intrigued, Fisher researched the company and met its then head, Erik Jonsson. At the time Wall Street was cautious about the firm as it was trading at 20 times earnings and its directors were selling shares. Fisher’s research, however, told him that they were selling for estate-management purposes, and he believed that TI’s status as the lowest-cost producer gave it a competitive advantage that would justify its price. He started buying in 1955.
What happened next?
Over the next 45 years Fisher would become one of TI’s biggest cheerleaders, constantly referring to the company in his investment books as an example of a company that you should invest in. It would also become a major part of the various portfolios that he would manage for clients. His faith was rewarded. Over the next 45 years, TI’s business would prosper thanks to its role in designing ever more sophisticated (and cheaper) chips for computers, turning it into one of the world’s leading semiconductor firms.
Lessons for investors
Overall, Texas Instrument’s share price would grow by 1,500 times from 1956 to 2000, an annual return of 18% based on price alone. Fisher’s success with this trade proves that a long-term buy-and-hold strategy can work if you pick the right company, but picking the right ones usually requires a lot of research. Ironically, one of Fisher’s early clients insisted on selling his stake early on, in the expectation that he’d be able to buy it back at a lower price. The price kept rising, and as a result that investor ended up missing out.