Jim Slater RIP - a legend and an inspiration for UK investors
We've woken this morning to the very sad news that Jim Slater has passed away at the age of 86. I'm not really sure where to start with this news, but firstly, I'd like to extend my condolences to his family and friends.
There will be a raft of obituaries in the press in coming days to tell the story of this extraordinary man, and rightly so. He achieved so much in his life, from his days as a swashbuckling capitalist building up Slater Walker, to his latter years where he reinvented himself as a children's author, Telegraph columnist and Stock Picking Guru. If you want to learn more about his life please do read up at the Telegraph here.
I was too young to have known Slater's life before the mid-nineties. But it was a little red book that he published around that time that has transformed the course of mine. I was given a copy of the "The Zulu Principle" by my father as I was nearing the end of my University days and was entranced.
In those pages I finally found a stock selection strategy that made sense. It was the 1990s and growth stocks were all the rage, tipsheets were everywhere, money was loose and you could make and lose a bundle at any time. Slater's writing was firm, and his approach was disciplined. You could sense the steel of the man through his words which may be the reason why his book has become a rock for so many thousands.
He preached a gospel that can be summed up as 'growth at a reasonable price', but he developed his own systematic way of selecting shares to meet this profile. He popularised a variant of the PE Ratio called the PEG. By dividing the forecast P/E ratio by the forecast Earnings Growth rate you could compare companies on different valuations and growth rates using the same metric. If a share had a PEG of less than 1, it meant that the earnings were expected to grow faster than the P/E ratio of the company and this for him was a great sign.
By this sleight of hand a stock growing at 15% and on a P/E ratio of 12 ( a PEG of 0.8 )could be considered a better buy than a company growing faster at 20% but on a P/E ratio of 20 (a PEG of 1). Slater had a bunch of other criteria to make the PEG more 'robust', and brought in many other rules to develop the complete system for stock selection.
In honour of the great man I do suggest that Stockopedia members buy a copy of his Zulu Principle for their bookshelf - you won't regret it. His system still works extraordinarily well and has been returning about 23% annualised since we've been tracking it in our model.
Beyond his books and in conjunction with HemScott he launched the stock picking bible Company REFS which helped so many people put the Zulu Principle to work. I subscribed to the REFS product for years and used to devour the "Investing for Growth" newsletter that was associated with it. He was at heart an educator and was rare in his genuine desire to help the private investor succeed.
I feel no shame in admitting that Stockopedia wouldn't he here without the work of Jim Slater. I like to think that we've taken on the baton of his pioneering product development and investor education work. If we stand on the shoulders of giants, the most important of them all was Jim Slater.
It's a very sad day for Slater fans. It feels like the end of an era.
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13 comments
My first knowledge of Jim Slater was around the mid nineties when I purchased shares in a furniture company called Uno after Jim had recommended them in one of the Sunday papers, and also after seeing the figures looked pretty good in Company REFS. I obviously didn't dig deep enough as Uno went out of business a few months later.
I have just read the comment above from muckshifter. That reminded me of some interaction during the dotcom boom, when we had reason for a civilised exchange of views on some totally technical matter. I was very surprised, about a month later, to receive a book in the post, O'Shaunesseys ..What works on Wall Street,... with a note from the publisher to say that Jim had asked him to send it to me. He was simply that sort of man, generous in both deed and spirit.
Sad news indeed. During the building of the Esher by-pass, which occurred at what I would think was an extremely difficult time for Jim Slater, in 1975 not long after the collapse of Slater Walker, a friend of mine who was the muckshift foreman for the contractor building the by pass had, he told me, the following encounter with Jim, whose house was at that time close to the by pass line.
There was a major pumping exercise needed to drain the saturated sands before muckshift could occur, and this resulted in a big pump working 24 hrs / day not far from Jim’s house. He complained about the noise keeping him awake and my friend went to see him and sort out the nuisance. The solution proposed and implemented by my friend was to build a thick wall of straw bales around the pump. It worked, and Jim turned up to see him to thank him and present him with a crate of whisky.
Not the usual outcome for dealing with a complaint from the public. A gentleman indeed!
I saw Jim Slater speak at investor shows a few times. He was fairly charismatic and liked to tell a few jokes. I think he certainly got many people in the UK interested in investing. I read his autobiography "Return to Go" which was good and am about to read a book on Slater Walker i.e. "Slater Walker" by Charles Raw.
Jim's investment style was to get to the narrative of a stock and why it would potentially do well. He also simplified things with his PEG approach and other statistics such as cash flow conversion. While this could do well it could also generate stocks that were high fliers before crashing to earth.
I think he could also oversimplify things by saying that you should invest in small stocks because "elephants don't gallop". That doesn't make sense at all to me because investing is about compounding over time. The large companies Unilever and Reckitt Benckiser have generated strong consistent returns that have generated a strong result over time. Most small companies will have issues at some stage.
In summary, Jim Slater was an interesting character and added value with tools like PEG but I personally wouldn't advise using his approach as the cornerstone of an investment strategy. Maybe it is best used to make "a turn" on a few stocks. In my experience, Mr Slater often seemed to get over enthusiastic about particular stocks that didn't stand the test of time.
Funnily enough I re-watched the 1999 documentary series "The Mayfair Set" on YouTube in which Jim Slater features. A fascinating look back at the seminal events of our time.
As if to demonstrate how different opinions can be John Plender's obituary of Jim Slater in today's FT is much less effusive focusing as it does on his activities in the 1970s. Perhaps Plender lost money in a Slater Walker company as he describes, almost as an after thought, Slater returning post Slater Walker securities, to a 'modest role' in weekend share tipping and writing several books!
I've got the Zulu Principle book and the later follow-up book by Jim Stater, "Investment Made Easy", both published by Orion. While I didn't appreciate them fully at the time as I was more a Technical Analysis, short term (swing) trader; now as I head into an early "active investing retirement" I appreciate far more the (longer term) investment approach and more fully appreciate the great wisdom within these books. Thank you and RIP Mr. Slater, gentleman!!
Jim Slater's book helped open the eyes, for many, to some of the very sound principles of investing for individual investors. jim's going is not the end of an era, it was the start of an era. Our thoughts go with his family and the legacy he leaves behind.
I was surprised, and impressed, that Tiny Rowland bailed him out before he started publishing children's books. Not the sort of thing you would associate Tiny with but in keeping with both that the two of them kept in quiet.
Very different investment styles of course. Slater was the arch trader yet Tiny said Lonrho never sells. Jim hated dividends but Tiny loved them, too much so in the end of course.
Jim Slater and the Zulu Principle kick started my investing. it is still my default strategy, the first book I recommend on the subject and one that has served me very well. Genuinely sad to hear this news and thoughts are extended to his family.
After following the book Robbie Burns The Naked Trader, there seemed a natural progression in my education when I then read The Zulu Principle. Jim emphasised the importance of rules based strategy and sticking to it. By following the Zulu principle I also got into the habit of focussing on both historic accounts and forecasted figures. Up to that time I only seemed to focus narrow view on the current financial year.
Finally the Zulu principle introduced me to look at the basics of the cash flow statement. Thanks to the author I was then able to link cash flow to earnings and provided the floor to explore this link further.
HIs book is easy to follow and is relevant today as it was many years ago.
I would like to echo your sentiments Ed and though he was not my main motivator for my love of investing, I seem to have know of his existence for decades (I'm 54). His book is one of the few truly great investment books written by somebody on this side of the pond and I will now re-read and would urge every investor to do so.
That said my over riding memory of Slater is of him when asked in an interview "what does your company make?" The interviewer expecting the reply "ball bearings or widgets", got the reply from Jim Slater "oh about two million a year". I just love that story.
I totally echo all the sentiments here. What an inspiration. I bought two of Jim's books about 20 years ago and they remain in my top 5 favourite investment books because they are so understandable. I feel the need to buy an updated copy and read again. I so admire people like Jim who are self made successes and want to impart their knowledge in an accessible form to the rest of us. RIP.