The Small Stock Anomaly Or Why Ken Fisher is a Marketer

And he's definitely not his old man.
Warren Buffett said of Philip Fisher:

"I sought out Phil Fisher after reading his "Common Stocks and Uncommon Profits". When I met him, I was impressed by the man and his ideas. A thorough understanding of a business, by using Phil's techniques … enables one to make intelligent investment commitments."

I haven't seen Buffett comment on Ken.
From FT Alphaville:
Small, or dancing on pinhead small?

Ken Fisher, Forbes columnist and money manager billionaire, took to the pages of the FT in June to poke advocates for small listed companies in the eye.

You don’t want to hold speculative stocks late in a bull market. Don’t be seduced by the siren song of small beats all.

The idea that a collection of small capitalisation stocks are always a better investment than a collection of stodgy and safe big companies is a myth, he wrote.

Macquarie, however, went away and had a look at the data, and they disagree. Although the better conclusion might be about the nature of these types of arguments more broadly.

For those unfamiliar with the claims, there is often thought to be a premium for investing in smaller stocks. Small companies are at greater risk of going bust if they overextend, grow too fast, or get caught in a recession. So fewer people look at them, and in-depth reports from the research departments of large banks are rare.

It takes more work then to spot the unpolished gems amid the stock promoters, charlatans or one-hit wonders with unsustainable business models. As Warren Buffett told an Omaha student in 2005:

You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map – way off the map. You may find local companies that have nothing wrong with them at all. A company that I found, Western Insurance Securities, was trading for $3/share when it was earning $20/share! I tried to buy up as much of it as possible. No one will tell you about these businesses. You have to find them.

The question though is whether there is a premium for buying small stocks en masse. They may be more economically sensitive, and so rise more in value in good times, but then collapse more in the face of recession. That would mean, broadly, that they are different to large stocks but not intrinsically better investments — making money will depend on choosing the right time to prefer small stocks to large stocks, and vice versa.

On the other hand, small companies tend to grow faster. They are inherently more adaptable. Investors with lots of capital or conservative restrictions on how to invest it can’t put money into businesses until they reach a certain size, so there may be a return to be had from investing before that threshold is crossed and money rushes in....MUCH MORE

Here is CXO Advisory analyzing Fisher-the-Younger's performance:
Last Updated: September 5, 2012 • Posted in Individual Gurus

Ken Fisher Chronicles

We evaluate here the Forbes.com commentary of Ken Fisher regarding the broad U.S. stock market since the beginning of 2000. Ken Fisher is Chief Executive Officer and Chief Investment Officer of Fisher Investments, which operates under the assumption that “supply and demand of securities are the sole determinants of securities pricing.” They believe that, to add value, “active management…must identify information not widely known or interpret widely known information differently and correctly from other market participants.” The table below quotes forecast highlights from the cited source and shows the performance of the S&P 500 Index over various numbers of trading days after the publication date for each item. Grading takes into account more detailed market behavior when appropriate. Red plus (minus) signs to the right of specific forecasts indicate those graded right (wrong) based on subsequent market behavior, while red zeros denote any complex forecasts graded both right and wrong. We conclude that...

... Ken Fisher correctly counseled readers to stay away from stocks from the beginning of 2001 through mid-2002, but was a bit too soon into the market in early July 2002. He was right about general market direction, but overly overoptimistic, for 2004-2007. During late 2007 through early 2009, he was dramatically over-optimistic. For the balance of 2009 and most of 2010, he was correctly bullish. For 2011, he was correctly neutral....MORE

However see also CXO's coverage of "Forbes Evaluates Ken Fisher’s Stock Picking":

In summary, as calculated by Forbes, Ken Fisher’s public stock picks have outperformed the broad U.S. stock market over the past 16 years by average 5.3% annually.

Fisher is ranked 2nd by CXO in Guru accuracy.

Previously:
A very bad call on Aug. 27, 2007
Ken Fisher: Ballyhoo and the return of greed

Sept. 2010
Fisher's forward to "The Battle for Investment Survival"