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…

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