Jim Slater shares his latest views on asset allocation, investing criteria, gold and oil at the Growth Company Investor Show

Thursday, Sep 30 2010 by
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Jim Slater
Jim Slater

Jim Slater’s Zulu Principle books were some of the first books I read about investing before I joined the City as a young broker and so it was with great pleasure that I listened closely to his views on the market at the very enjoyable Growth Company Investor Show yesterday afternoon at the Barbican.

The background on Slater, if you don’t know his story, is very colourful.  He was a corporate raider building up Slater Walker through the 60's and early '70s in swashbuckling style and setting the mould for Jimmy Goldsmith who replaced him when it all went a bit wrong - the Bank of England having to step in to prevent it's collapse during a banking crisis.  He reinvented himself as a successful  children’s author, broadsheet columnist and highly successful investing guru publishing the Zulu Principle and founding Company REFS. 

He has further built his fortune by practicing what he preaches through growth company investing and latterly investing in resources.

What follows are my notes from his presentation:

 

Outlook & Asset Allocation

He foresees 2 contrasting possiblities in terms of the economy and macro environment:

  1. In the Dark Room -  This scenario involves deleveraging of banks, overcapacity, banks not lending, underfunded pensions, sovereign debt in doubt, US states in deficit, bleak deflationary output, US on point of no return - all pretty grim stuff really.
  2. In the Light Room (or the Quantitative Easing room!) - He likens it to being a heroin addict. You can't take the patient off the drug.  The Bank of England and the Federal Reserve are talking of more Quantitative Easing.  It makes cash a terrible investment but leads to potentially hyperinflation.

So, based on that, his preferred asset allocation is to hedge your bets and prepare for either or both scenarios at the same time: 

  • 25% in Cash,  
  • 30% in small cap growth shares, 
  • 30% in gold shares, 
  • 5-10% in oil, 
  • 5-10% in agriculture.

Growth Shares

Slater still insists that you should pick under researched niche small cap shares where reratings and takeovers are more likely.  He gave the statistic that the average micro cap share has beaten the market by 10 to 1 since 1940. 

Zulu Principle Criteria

Obviously he still bangs the table about the Zulu Principle System that he is renowned for and advocates his Company REFS product.  …

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3 Comments on this Article show/hide all

muckshifter 2nd Oct '10 2 of 3
3

Nice to hear Jim Slater is still going strong, thank you Edward. In the 70s we were building the Esher bypass which went close to his home. He came into the office to complain about the noise of a dewatering pump close to his house which was running 24/7 and keeping him awake at nights. A friend of mine, who was the earthworks foreman, went straight out and built a thick walled enclosure for the offending pump out of bales of hay. Jim turned up the next day and presented him with a crate of whisky - so, a nice bloke IMO, as complainants rarely said thanks when you dealt with a complaint in those days (mind you we did have debris punching holes in the roofs of every one of a row of seventeen houses in one notorious cutting blast in Yorkshire, so perhaps some complaints were less forgiveable)

Sorry for the off topic.
Regards.

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MrM 15th Apr '13 3 of 3

The share price of IDH was around 900p at the time of this article, peaked at 1196 in July 2011, it's now 320.
Paul Scott mentioned in one of his morning posts that the company had been hammered by competition.
Interesting that JS was warning about the problems in 2010, how did he know?

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Edward Croft

CEO at Stockopedia where I weave code, prose and investing strategies to help investors beat the stock markets. I've a background in the City and asset management but now am more interested in building great stock selection tools for the use of investors online.   Traditionally investors online have had very poor access to the best statistics, analytics and strategies for the stock market and our aim is to set that straight.  High Quality fundamental information has been prohibitively expensive in the past and often annoyingly dull. People these days don't just want to know the PE Ratio and look at a balance sheet. They expect a layer of interpretation over data, signal from noise and the ability to know at a glance whether a stock is worth investigating or not. All this is possible using great design and the insights gleaned from quantitative research.  Stockopedia is where we try to make it happen ! more »

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