Value Investing: Philip Fisher on When to Sell a Stock

Common Stocks and Uncommon Profits, by Philip Fisher

Philip Fisher (1907–2004) is widely considered the pioneer and thought process leader in long-term value investing. Years after his death, Fisher

is widely respected and admired as one of the most influential investors of all time. Fisher developed his long-term investing philosophy decades ago

and discussed them in his seminal book, Common Stocks and Uncommon Profits. Common Stocks and Uncommon Profits was first published in 1958

and continues to be a must-read today for investors and finance professionals around the world.

Philip Fisher, Investor, Author of Common Stocks And Uncommon Profits Today, we will dig deeper into his selling discipline. For many investors, buying a stock is much easier than deciding when to sell it. Selling securities is much more difficult than buying them. The average investor often lacks emotional self-control and is unable to be honest with himself. Since most investors hate being wrong, their egos prevent taking losses on positions, even if it is the proper, rational decision. Often the end result is an inability to sell deteriorating stocks until capitulating near price bottoms.

Selling may be more difficult for most, but Fisher actually has a simpler and crisper number of sell rules as compared to his buy rules (3 vs. 15). Here are Fisher’s three rules for selling a stock:

  • Wrong Facts: There are times after a security is purchased that the investor realizes the facts do not support the supposed rosy reasons of the original purchase. If the purchase thesis was initially built on a shaky foundation, then the shares should be sold.
  • Changing Facts: The facts of the original purchase may have been deemed correct, but facts can change negatively over the passage of time. Management deterioration and/or the exhaustion of growth opportunities are a few reasons why a security should be sold according to Fisher.
  • Scarcity of Cash: If there is a shortage of cash available, and if a unique opportunity presents itself, then Fisher advises the sale of other securities to fund the purchase.

Many investors are reactive and sell at the same time everyone else does—when they’re fearful. But your emotions aren’t the best guide for making critical financial decisions. Long-term investors should not fear occasional swings in the market. When the market dips or takes an unusual turn, that is the perfect time to review your portfolio and re-evaluate your investing strategy.

Megalithic Monuments of Hirebenakal near Raichur in Karnataka

Megalithic Monuments of Hirebenakal, Prehistoric Site, Raichur in Karnataka

The term megalithic culture is used to denote the culture of a group of people who built their large tombs with the help of mega (huge) liths (stone) or huge stones. Literally there are thousands of such tombs all over South India including Karnataka. In general terms they were the successors to the new stone-age people. After the megalithic period we enter into the early historic period.

Chronologically, the megalithic period lasted from about 10th century B.C. to 3rd Century AD., with lot of various dates in between. There is a great variety in their tombs and culturally they are the introducers of iron into South India. Though their habitation sites are rare, their burials have been found in groups in hundreds. They had learnt the technique of quarrying and dressing stones for the purpose of the building their tombs of different varieties. These tombs contain bones and other related grave goods including iron objects. After the systematic excavations of Brahmagiri megaliths (near Chitradurga) many other sites have been excavated which give us a glimpse into the life of the megalithic people.

Benakal Prehistoric Site, Karnataka

Megaliths at Hirebenakal in Raichur, Aihole in Bijapur, and Kumati have been studied in, great detail. Kumati is unique because it has stone anthropomorphic figures of huge size, not generally found elsewhere. Megaliths are locally known as Moriyaramane, Moriyara Angadi or Moriyara Gudda. They may be divided into many varieties on the basis of their external appearance as dolmenoid cists with port-holes, rock-shelter chambers, polygonal cists, dolmens with closed port~hole, stone circles etc.

The underground chambers generally contained various types of pottery with food and water along with iron implements used by the person, beads, other ornaments and skeletal remains. This shows that they had a strong belief in life after death. With the help of these objects, life of the megalithic people has been reconstructed. They belonged to an agricultural community and manufactured iron tools such as knives, axes, hooks, chisels etc. Perhaps they had a class system the details of which are not known. They practiced agriculture and lived in huts. Thus the megalithic people laid a firm foundation for the beginning of historical culture.