Question

Describe what is at the core of Philip Fisher's methodology. How does this methodology align with the efficient market hypothesis, and how does it align with the concept of intrinsic value?

Answer 1

Philip fisher methodology of selection of the stock is all about selection of high growth stocks and high market share stocks which have ability of maximization of its rate of return in the long run and he is also advocating that these stocks should never be sold because he is an advocate of holding of the stocks for the entire lifetime as he himself has held Motorola in his portfolio.

He is also having an investment strategy in relation to the small cap stocks and he is trying to advocate that all those small cap stock has potential of returning very high rate of return over a long period of time so invested will be trying to find out these small cap stocks in order to make high rate of return in long run.

Methodology of Philip fisher is not completely aligning with the Efficient market hypothesis because Efficient market hypothesis advocates that nobody can outperform the market rate of return but Philip fisher has advocated that strong small capitalised companies can be outperforming the overall market and one of the thing which is synchronising between both the Efficient market hypothesis and Philip fisher methodology is that Phillip fisher always advocated for never selling out on the investment and holding it always and Efficient market always advocated for never selling out on investment because it is a passive investment strategy