When Jim Slater wrote The Zulu Principle back in 1992, it quickly caught on as an investing bible for anyone that wanted to find great growth shares at reasonable prices. It also cemented a remarkable return for a man who made and lost a fortune during his days as a swashbuckling City dealmaker two decades earlier. Since then, the strategy has proved to be highly effective at picking out growth stars and this year has managed to find some of the best performing stocks in the market. The bad news is that these Zulu shares are getting harder to find.

Slater devised his investing process while penning a regular Sunday Telegraph column under the nom de plume ‘the Capitalist’. The appeal of the book that followed owes as much to his enthusiasm and solidarity with regular investors as it does to the investing thesis that underpins it. Slater wrote The Zulu Principle with assistance from his son Mark who has used the the strategy at his MFM Slater Growth fund with notable success over the past three years, earning it top performing fund in 2010 by industry researcher, Trustnet.

In search of growth

Slater’s rules for buying and selling growth shares at the right moment and the right price focus on earnings growth in generally small, profitable companies with strong cashflow, low debt and signs of strength in their shares. Among the most important features is what’s known as the the PEG, or the ‘price-earnings growth’ factor. This handy value metric measures whether the promise of growth comes at a reasonable price and does it by studying the relationship between the forecast price-to-earnings ratio and the expected rate of earnings-per-share growth. You can read much more about Zulu Principle investing here.

At Stockopedia, our interpretation of the Zulu Principle Rules has outperformed the FTSE 100 for the last two years - with a 43.9% return in the last 12 months versus a measly 10.8% for the FTSE 100. That performance also measures up well against the MFM Slater Growth fund which returned 19.5% over the same period, perhaps going to show how running large amounts of money can reduce the opportunity set available. The screen performance has been driven by some spectacular individual gains including shares in industrial printhead supplier Xaar (LON:XAR), which were picked up last December at 292p and have…

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