Phil Fisher Texas Instruments Play and Key Takeaways from 6 Investing Legends

I have spent twenty years building software systems. In that time, I have learned one absolute truth: the best architectures look obvious in hindsight. The same is true for the best investments. When you look at Phil Fisher buying Texas Instruments in 1956, it seems like the most natural thing in the world. But at the time, almost everyone thought he was wrong. That gap – between what looks obvious later and what feels terrifying now – is where all the money is made.

This is the final post in our twenty-five-part journey through six investing legends. Let me show you Fisher’s greatest investment, then we wrap everything up.

The Texas Instruments Setup

In the summer of 1956, Fisher had a chance to buy a significant block of Texas Instruments shares at 14 dollars per share. The sellers were the company’s own principal officers and largest stockholders.

Most investors would have run away. Here is what the situation looked like on paper:

The price of 14 represented twenty times anticipated 1956 earnings of about 70 cents per share. Prior four years of earnings were 39 cents, 40 cents, 48 cents, and 50 cents. Hardly an exciting growth record. Even worse, some of those earnings were inflated by tax loss carry-forwards from a corporate acquisition, meaning true operating earnings were even lower than reported. And the company insiders were selling.

When the SEC filings showed officer selling, brokerage firms piled on with bearish commentary. One brokerage bulletin famously wrote about the insiders: “We agree with them and recommend the same course!” Sell, sell, sell.

The surface-level story was clear: small semiconductor company, historically high price-to-earnings ratio, management selling, and massive competition from bigger, richer companies entering the transistor business. Every statistical signal screamed danger.

What Fisher Actually Saw

Fisher did not rely on surface statistics. He applied his fifteen-point checklist – the same systematic framework we covered in the previous two posts. And Texas Instruments did not just score well. It scored magnificently on every single measure.

The insider selling? Completely legitimate. These officers had become millionaires on paper through their holdings. Their other assets were negligible by comparison. They were selling a tiny fraction of their total shares to diversify. Estate tax liability alone made this prudent regardless of company outlook. When insiders sell a small percentage while retaining massive positions, that is not a warning signal. That is personal financial planning.

Fisher also saw what the brokerage analysts missed entirely. Texas Instruments was not just a transistor company. It had growing geophysical and military electronics businesses that the controversy over insider selling had completely overshadowed. The semiconductor division was growing fast, but more important than raw volume growth were the strides management was making in research, manufacturing mechanization, and building distribution infrastructure.

This was a company investing in every dimension simultaneously – products, processes, and people. The kind of foundation that compounds for decades.

The Results: 1000 Percent in Three and a Half Years

Twelve months after Fisher’s purchase, Texas Instruments’ earnings per share grew 54 percent to about 1.10 dollars. But because the market finally started recognizing the quality, the price-to-earnings ratio expanded too. The stock approximately doubled in one year. Earnings growth plus multiple expansion – the double compounding effect.

Then the dominoes really started falling. Earnings went from 1.11 dollars per share in 1957 to 1.84 in 1958, with projections topping 3.50 in 1959. IBM – the undisputed giant of computing – selected Texas Instruments as a partner for joint research in semiconductor applications. In 1959, TI announced the integrated circuit, a breakthrough that would reshape all of electronics. They could now put a complete electronic circuit on a piece of semiconductor material the same size as a single transistor.

The stock rose over 1000 percent from Fisher’s purchase price of 14 dollars in less than three and a half years. And Fisher pointed out that even at those elevated prices, future earnings growth might drive shares even higher still.

The Lesson Inside the Lesson

The Texas Instruments case study is not really about Texas Instruments. It is about the gap between what quantitative screens tell you and what qualitative investigation reveals.

Every traditional metric said this stock was expensive and dangerous. But underneath those numbers was a management team building something extraordinary – research producing real products, manufacturing processes competitors could not replicate, distribution infrastructure being constructed before it was needed, all partly funded by defense contracts transferable to commercial markets.

Insider selling is not always bad news. When officers sell a small portion of enormous holdings for estate planning, it means nothing about company prospects. Insider buying, however, is always significant – nobody buys their own stock with personal money unless they believe it is going up.

The people who sold TI alongside the insiders relied on statistics and commentary. The people who bought relied on deep understanding of the business.

Wrapping Up Twenty-Five Posts: What Each Legend Taught Us

We have spent months studying six investors who beat the market not through luck or insider information, but through discipline, framework, and patience. Here is the core lesson from each one.

Warren Buffett taught us that investing is not about being clever – it is about being disciplined. Buy excellent businesses at fair prices, hold them forever, let compounding work. Through Sanborn Maps, American Express, Washington Post, and BNSF, he showed the best opportunities come when good businesses face temporary problems. Rule number one: never lose money. Protecting capital is the foundation everything else is built on.

Benjamin Graham gave us the intellectual framework. Net-net analysis, margin of safety, Mr. Market – these are the bedrock of value investing. Through REITs, Air Products, H&R Block, and others he showed that buying assets below intrinsic value is the closest thing to a free lunch. Penn Central showed the dark side – statistical cheapness without quality destroys capital. Graham wrote the specification. Every investor since builds on his blueprint.

Joel Greenblatt proved you do not need genius – you need a system. His magic formula ranks companies by earnings yield and return on capital. Through spinoffs like Host Marriott and merger securities, he showed structural mispricings exist because most investors are too lazy or constrained to exploit them. Best opportunities are in the places nobody wants to look.

Seth Klarman drilled margin of safety into us as a way of life. Through distressed debt, failing banks, liquidations, and hidden asset situations, he demonstrated that the biggest returns come from the most uncomfortable investments. His core teaching: risk is not volatility on a screen. Risk is permanent loss of capital.

Peter Lynch showed ordinary people have an information advantage over Wall Street. Through Hanes, The Limited, Service Corporation, La Quinta, and other everyday companies, he proved boring businesses make exciting investments. You interact with potential investments every day – at the mall, the restaurant, the gas station. Pay attention.

Phil Fisher taught us to look beyond the numbers. His fifteen-point checklist evaluates management, R&D, sales, margins, labor relations, and long-term vision. Through Motorola, Du Pont, American Cyanamid, and Texas Instruments, he showed the best investments are companies where brilliant management creates growth rather than waiting for it. Spend more time investigating and less time trading.

The Common Threads

After twenty-five posts and six radically different investors, certain patterns emerge that are impossible to ignore.

Patient capital wins. Every single one of these investors held positions for years, sometimes decades. Buffett held Washington Post for over forty years. Fisher held positions until companies stopped meeting his criteria. Lynch ran his fund for thirteen years. None of them were day traders. None of them timed the market. They found good situations and waited.

Do your own work. Graham analyzed balance sheets when nobody else bothered. Greenblatt dug through SEC filings on spinoffs. Klarman investigated distressed companies that analysts refused to cover. Lynch walked through malls. Fisher conducted extensive interviews with employees, competitors, and suppliers. In every case, the information advantage came from effort, not genius.

Buy when others are afraid. Buffett bought American Express during the salad oil scandal. Graham bought net-nets during the Depression. Klarman bought during banking crises. Fisher bought Texas Instruments when insiders were selling and brokers were screaming to get out. The best prices come when everyone else is running for the exits.

Understand what you own. Not one of these investors bought something they did not understand deeply. Lynch explicitly said never invest in a business you cannot explain with a crayon drawing. Buffett avoided technology stocks for decades because he did not understand them. Fisher spent months investigating before buying a single share. Competence over coverage, always.

Protect against permanent loss. Graham’s margin of safety, Klarman’s obsession with downside risk, Buffett’s “never lose money” rule, Fisher’s insistence on management quality – all are different expressions of the same idea. The first job of an investor is to not lose money. Growth comes second.

Practical Advice for Today

Distilling everything from these six legends into actionable steps:

Build a checklist. Graham’s quantitative approach, Fisher’s qualitative one, Greenblatt’s ranking formula – pick a systematic process and stick with it. Emotion is the enemy. A checklist is the weapon.

Focus on what you know. You do not need an opinion on every stock. You need a correct opinion on a few. Skip what you do not understand. Buffett’s “too hard” pile is not laziness – it is discipline.

Be willing to look stupid. Every great investment in this series looked wrong at the time of purchase. If everyone agrees with you, the opportunity is probably already priced in.

Think in decades, not quarters. Compounding needs time. The real advantage is that great businesses keep finding new ways to grow, and you capture all of it by simply doing nothing.

Start. The best time to begin was twenty years ago. The second best time is today. Every legend in this series made mistakes. Graham lost money. Lynch had losers. Buffett bought a struggling textile company. They kept going, kept learning, kept refining.

Key Takeaways

Fisher’s Texas Instruments investment shows that deep qualitative research can reveal opportunities that statistical analysis misses entirely. A stock looking expensive on historical earnings can still be a bargain if management, R&D, and market position are exceptional.

Insider selling is not automatically a red flag. Small sales from enormous holdings for diversification and estate planning are normal. What matters is remaining ownership and the reason for selling.

The best investments combine earnings growth with price-to-earnings expansion – double compounding. This happens when the market transitions from skepticism to recognition.

Across all six investors in this series, five principles hold universally: be patient, do your own research, buy when others are afraid, understand deeply what you own, and always protect against permanent loss.

No single approach is perfect. Graham’s pure quantitative value, Fisher’s pure qualitative growth, and everything in between all have strengths. The best investors often combine elements from multiple philosophies to match their own temperament and situation.

This is the end of our twenty-five-post series. The tools are in your hands. The legends showed us their methods. Now it is your turn to invest.