Martin Zweig Growth Investing Screen: How does it work?

Saturday, May 07 2011 by
6
Martin Zweig Growth Investing Screen How does it work

In Brief

A GARP investing strategy that uses both fundamental analysis and market timing. It focuses on strong growth in earnings and sales, a reasonable price-earnings ratio given the company's growth rate, insider support, and relatively strong price action.

Background

Martin E. Zweig was a reputed US growth money manager back in the 1990’s as well as an investment newsletter writer. He was named stock picker of the year 2 times in a row and wrote a book titled “Winning on Wall Street”, which outlines his investing strategy. He is, according to Forbes Magazine renowned for his "eccentric and lavish lifestyle" as well having at one point the most expensive residence in the United States. 

Zweig is essentially a growth investor but with a conservative streak, focusing on selecting growth stocks with certain value characteristics, through a system that uses both fundamental analysis and market timing. Zweig’s basic investing strategy is to be fully invested in the market when market indications are bullish and to sell when the indications become bearish. 

Zweig’s method brings together several fundamental and technical components:

  • The Super Model, where the other indicators are added to yield a total score. The Super Model tells Zweigh whether the broad market is likely to be bullish or bearish. This is based on i) fundamental analysis of monetary conditions (the main indicators used are interest rates and debt levels) and ii) technical analysis of the stock market as a whole, measuring market momentum via the three indicatirs: the Advance/Decline ratio, Up Volume, and the 4% Indicator. If the Super Model indicates bullish conditions, Zweig believes investors should allocate their maximum funds to buying stocks. 
  • Fundamental Screen - Individual stocks are screened for superior fundamentals, in particular, above average earnings growth and a reasonable price/earnings ratio.
  • Technical Screen: Stocks whose fundamentals look attractive on this basis are screened to find stocks whose price action shows strength.

Calculation / Definition 

Martin Zweig does not study any single stock in great detail but prefers to use a "shotgun" (rather than a "rifle") approach based on fundamental screens.

"If a company can show nice consistent earnings for four or five years I don't care whether it makes broomsticks or computer parts."

His rough criteria are:

  • Earnings Trend - To pass his strategy, a stock must meet a slew of earnings-related criteria, showing that its earnings…

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Disclaimer:  

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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