Zulu Investing: Would Jim Slater buy these 5 growth stocks?

Wednesday, Nov 23 2011 by
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Zulu Investing Would Jim Slater buy these 5 growth stocks

“Investment is the art of the specific and selection is far more important than timing.”

Of the stalwarts of stock market investing, Jim Slater’s enduring appeal to UK private investors perhaps owes the most to his obvious affection for high quality but not overpriced growth companies. For the former City corporate raider, broadsheet columnist and children’s author, growth companies require careful and considered selection. After all, while buying into a growth story at the right moment and at the right price is paramount, these are companies that an investor could conceivably keep in a portfolio for very many years – come bulls and bears.

Never short of a forthright view and always amenable to sharing his views on stocks, Slater’s 1992 book The Zulu Principle has gone on to become a modern classic amongst private investors. In it, he not only sets out a carefully calibrated technique for measuring a company’s growth potential but he also encourages investors to do their own digging, to read between the lines and interpret information in a way that will give them an edge.

Start sieving

His approach starts by sieving the market for potential growth stock candidates and identifying which of them are attractively priced. The first hurdle for any company is ownership of a proven record of earnings per share (EPS) growth together with broker forecasts that the growth will continue by at least 15% over the next couple of years. “This gives you an arithmetical fix on the company,” Slater explains. Importantly, the stock must have four years of EPS growth – historic of forecast, or a combination of the two.

While scrutiny of past and future growth form the backbone of his screening technique, Slater’s commitment to the story behind a stock is what makes his approach intriguing to adopt. Investors are urged to scrutinise companies and filter the basket using a common sense set of criteria.

For instance, small, profitable companies with strong cashflow and low debt and signs of strength in their shares are important, while sectors that are less susceptible to cyclical patterns are preferred. Meanwhile, a competitive advantage, strong management and signs of optimism in the chairman’s statement are all pluses. Finally, a critical moment, such as a new CEO, as well as directors buying shares are also on the checklist.

PEG formula

On passing…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Globo Plc is a technology company engaged in enterprise mobility management and application development. The Company offers solutions, such as application development and delivery services, mobile application development platform, ready for business mobile application and mobile device management, among others. Its products include GO!Enterprise Mobile Device Management, GO!Enterprise Workspace and GO!AppZone. Its GO!Enterprise Mobile Device Management product allows information technology (IT) administrators to manage and secure corporate owned, personally enabled (COPE) and individual-liable devices (bring your own device (BYOD)). Its GO!Enterprise Workspace product is an enterprise mobility solution, which uses a secure mobile application container and mobile backend services to provide management, control and compliance to enterprise applications and data. Its GO!AppZone product helps to develop and deploy cross-platform mobile applications for various audiences. more »

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P/E (fwd)
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Yield (fwd)
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P/E (fwd)
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First Derivatives plc is engaged in the provision of a range of software and consulting services, particularly to finance, technology and energy organizations. The Company provides software solutions that address data challenges, particularly those involving large data volumes and streaming data, across a range of sectors. Its segments include Consulting activities, which include services to Capital Markets, and Software activities, which include the license of intellectual property and related services. Its products are built on kdb+, a time series database developed by the Company. Its software applications enable the real-time capture and analysis of market data. Its consulting customer base includes investment banks, brokers, exchanges, regulators and hedge funds. The Company's subsidiaries include Activate Clients Limited, Affinity Systems Limited, Cowrie Financial Limited and First Derivatives Canada Inc. more »

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P/E (fwd)
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3 Comments on this Article show/hide all

Tommy Rock 26th Nov '11 1 of 3
2

This view on IDS systems completely fails to understand the diagnostics market and shows the dangers of basing opinions on meaningless financial statements from self interested board members. Actually this company is extremely exposed to competition from Diasorin and Siemens both of whom have more advanced and attractive automated systems than the iSYS, a better test panel and much greater market penetration. The vast bulk of IDS income comes from vitamin D kit sales, a position which will be drastically eroded as Diasorin, Siemens, Roche and Abbots will pick up speed on their new kits. The major issue with iSYS is that is doesn't integrate with modern automated lab systems and has a none existent test panel, this leaves it isolated in the market.

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kevinsamvance 29th Nov '11 2 of 3

Don't forget Jim Slater also used three month, six month and 12 month Relative Strength as a signal to exit trades. On that basis he would not be holding GBO or IDH. SUN is doubtful but the other stocks pass the RS test.

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Tommy Rock 29th Nov '11 3 of 3

IDS £4.50 today down from £12 4 months ago!! well Jim, any suggestions?

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About Ben Hobson

Ben Hobson

Strategies Editor at Stockopedia. My goal is to help private investors learn and invest with confidence through the articles, ebooks and other resources we publish on site. I also occasionally bunk off to interview famous investors at expensive restaurants. I studied History at Aberystwyth University, trained as a journalist and covered business news and corporate finance before settling in as one of the first staff members at Stockopedia.  Away from Stockopedia I'm a mountain bike junkie. more »

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