The Art of Execution and Beyond The Zulu Principal

15th Sep '21 by Revs8

21 comments 1679 reads

Hi all,

For those less experienced investors (like me). I recently read 2 books on my summer holiday that I wish I had read 6 months ago (I might have avoided a couple of poor investments or sold out before they became big mistakes).

The first book is The Art of Execution by Lee Freeman-Shor.

Statistically only half your investments will be winners (that is the industry norm). However, if you win big and keep your losses small then you can make a lot of money. If you can be an assassin and a connoisseur then you will maximise your gains. Its brilliantly written and only took a day or two to read (on holiday).

The second book is an old classic called: Beyond the Zulu Principal by legendary investor Jim Slater.

Its dated (written in 1996) but the principals are still valid today. Surmise to say I now understand how to value growth (and how to find good value growth) instead of just looking for shares at knock down prices. It also gives good advice on portfolio distribution and when to sell.

The "old hands" in here might wonder how I didn't already know the above principals but I feel there might be many, like me, who will do better if they read these simple to read books. Enjoy.

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wattanut

14th Oct '21

I use a modified version of the Zulu screen for the majority of my selections. The Slater version of peg is quite restrictive in that there must be 4 consecutive periods of growth, whether that be forecast or retrospective. I use rolling peg which seems pretty good to me. If there aren't many results I will ease out p/e or mkt cap.

To improve my hit rate I use a weekly MACD. I don't buy until MACD crosses the zero line or MACD crosses the signal line above zero, even then I want to see increasing volume.

I recommend reading Stan Weinstein's book "Secrets for Profit in Bull or Bear Markets". It's quite old now but the fundamentals are still valid. He uses a Mansfield Relative Strength chart for timing buys, which Stockopedia doesn't have but I have found the weekly MACD a reasonable substitute.

I know this has been a reasonably good year for trading but before the pullback in the last month or so my success rate for YTD was around 70% ( haven't checked it since).

It would be interesting to know how everyone else is doing?

Rusty2

Yet there are reports that the best investors are dead which would be similar to rabbits.

If you don't sell losers then they become a small part of your portfolio and winners become larger. The issue is not just losers but when to sell winners. The issue I have with many of these books is there written about the US markets. The UK markets are different.

I do look at the Zulu screen but there are few stocks selected, so I can understand about a modified screen.

An annoying issue with the new site is there is no date that the stock qualified and no history of when the stock was on the screen. Also only 50 screens allowed now on the new site.

I have used the William O'Neil CAN-SLIM-esque screen but this works much better in a bull market, it had a severe correction last year. I also have set various "Minervini style" screens.

ngms27

Both of these books are from UK authors though.

Looking at the categories in The Art of Execution

""Raiders” were managers who snatched at any profit they made; 10-30% was enough. The money was then re-invested and as we saw earlier, only with a 50%ish chance of success."

So Minervini would be a raider? Also Robbie Burns, however his winners when I last checked were around 70%.

The Phoenix

Not necessarily Ray, Robbie has held stocks like Telecom Plus (LON:TEP): since they were near a £1.

He doesn't generally get out all at once as normally scales into a stock over three-four blocks as it goes up and then sells off a block at a time if trailing stop hit, so it could be he sells out stock x if it falls to £2 but is still holding some of the company that he bought lower down where the trailing stop hasn't been hit yet.

Regards

Andy

Hi Andy, yes he may hold a few long term but generally he is targeting gains of around 20% with a 10-15% stop loss, he run them higher if they have momentum .But he is like an assassin if the prices start to fall, some of his losses are very small, well before the stop loss.

dcon85

Well spotted Ray, I actually was looking over RB's old trades when thinking about another thread on 100-baggers / coffee can shares, trying to see how a random bunch of shares bought by a successful trader would have done if they were just left and held forever rather than judiciously sold. However I gave up pretty quickly as so few of the companies were still around.

While I had it on a spreadsheet I was curious so I had a look and his average stop is 12% and average target growth 29%, not looked at P&L but average holding period is around 28 weeks (excluding missing data and stuff never sold). Which is interesting although I wouldn't go too much on the averages as theres a wide range behind those numbers and RB's style itself is not cookie cutter, each position will have its own reasoning behind it.

His money management skills are second to none when it comes to cutting losses but in a recent interview he did confess the majority of the gains he has made have come from a handful of big winners he has held for a long time such as Tep, AB Dynamics & GB Group.

I keep meaning to go through his trades to try and get a better idea by looking at the charts of the kind of set up he favours but agree he is ruthless at binning anything starting to show signs of weakness.

Theres some good videos on his methods on the financial wisdom channel on Youtube from memory the author the videos said he operates a 3 to 1 strategy which isn't far off the figures you mention in your post.

15th Oct '21

OK so RB probably has a mixture of styles. But he does pretty well out of his "Raiders" trades.

Connoisseurs, if they pick the right stocks, could be the best method but I have found in the UK many companies go wrong after a good period. There are some exemptions such as Ashtead (LON:AHT), which is up around x39, Jd Sports Fashion (LON:JD.) x25 in the last 10 years according to Stockopedia charts. But you only have to look at Avon Protection (LON:AVON), Asos (LON:ASC), Boohoo (LON:BOO), Burford Capital (LON:BUR), £BOTB to see how things can reverse.

Fevertree Drinks (LON:FEVR) did very well for the first 4 years but since then has lost momentum.

Even the large US companies can have large pullbacks.

Problem is when to sell.

MiserableJacktPotato

16th Oct '21

I disagree, if you’re in for the long haul you should expect your high growth disruption companies to experience major falls, in ten years time we’ll be wondering what the fuss was with the likes of boohoo.

Read “Excellent Investing” it’s a neat summary of many other books and will give the reader a steer as to the type of investor they are and the strategies that will work for them.

LouieLuigi

19th Oct '21

The art of execution, Brilliant book. Insightful,. not your typical investment book., an understanding a little how your personality and psychology work in the investing world. was my favourite book until I read. Insider buy super stocks, buy Jesse Stine.

Breakout Trader

The principal behind Minervini's approach is that - if you're skilled at timing your entries and managing risk - its easier to find 10 x 7% winners (more or less +100% gain if compounded), then it is to find 1 x 100% winner.

Yes that was my point, some investors using the raider method can be successful. As Minervini is not a fund manager he was not included in this experiment. If he was then the results would probably be different.

Giuseppe Caruso

21st Oct '21

Hi,

Thanks for the advice.

Have you read The Zulu Principal first or you moved straight to the Beyond Zulu Principal book?
Just wondering if It will be easy for me reading the 2nd book without reading the first one or I need to read both.

Regards,

Giuseppe

Revs8

22nd Oct '21

Hi. I only read Beyond the Zulu principal and it’s easily understood. Some aspects are out of date (such as discussion on early tech companies) but the investing principals are not.

BnB

I enjoyed the read but good luck finding Zulu-principle investment candidates in today's growth-hungry market. None of the only three companies passing the screen on Stocko is going to be the next Amazon, that's for sure, though I do own one of them.

doug2500

24th Oct '21

My favourite investment book is probably 'The most important thing' by Howard Marks. Well worth a read, but more for long term investors rather than traders I would say.

The Art of Execution and Beyond The Zulu Principal

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Revs8

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