When it comes to value investing, many of us draw inspiration from the actions and investment formulas proved to be successful by the investors that have come before us. Essentially, we're standing on the shoulders of giants like Warren Buffet and David Dreman, hoping to follow their approaches and see the same levels of success and profitability.
Using Guru Screens to Invest Wisely
At STRIDE, we acknowledge this desire to follow in the footsteps of the crème de le crème of investors, along with the logic of learning from them. Within our platform, we offer a feature called Guru Screens, to help our clients to pinpoint investment opportunities based on the methodologies and principles of their investment idols.
Inside the Guru Screens feature, you'll find the criteria used by each of the following investment giants below. Use these to make informed choices based on a series of potential investment options.
Let's take a look at each guru in more detail, along with their screens. Many of them might seem like older models, but they've more than proven their efficacy and continue to do so because value investing doesn't change.
Once described as the "consummate contrarian", David Dreman is well-known as the founder of Dreman Value Management, author of five books on investment strategies and behavioural finance, and a regular Forbes contributor. Having learnt from previous costly errors in judgement, he follows a contrarian approach and advocates against following the herd when making investment decisions.
There are four screens describing his various approaches to the weighing up of opportunities. You'll notice that the first three look at liquidity, debt, dividend yield and earnings growth, while the dividend screen has a more income-focused approach.
Low PE Screen
This low PE screen from Dreman is apparently the favoured approach of Dreman Value Management LLC when selecting stocks, and focuses on finding on companies with cheap earnings.
Low Price to Cash Flow Screen
Another Dreman approach, this time looking at a typical contrarian approach targeting the lowest P/CF stocks for investment.
Low Price to Book Screen
A third Dreman contrarian approach, also similar to the P/E screen, looks at targeting the lowest price-to-book-value (P/B) stocks, the ratio of which is determined by dividing market price per share by book value per share.
Quality and yield are the order of the day with this dividend filter whose strategy focuses more on income while still managing to beat the market.
Once called "the greatest global stock picker of the century" by Money Magazine, Templeton rose from the depths of poverty to billionaire status. In a career that included co-founding his investment firm and several highly successful international investment funds, his approach to investment is value-contrarian by nature. He focused on searching for companies around the world that offered excellent long-term outlooks with low prices.
A strategy characterised by low multiples, growth and low debt, and which combines value and growth factors to identify stocks trading cheap prices with a good outlook.
Best known for his management of one of the best performing mutual funds in history, Vanguard's Windsor Fund, John Neff's reputation as being the "professional's professional" was earned after he held a record of outperforming the S&P 500 index 22 times in his 31 years working for Wellington Management Co. He often warned against "adrenaline markets", driven by momentum, and his investment style is best characterised by the decision to purchase stocks in all sizes, provided they all revealed low P/E ratios.
On Investing Screen
Another tried and tested approach, Neff's model focuses on a low P/E ratio, with strong indicators of growth consistency across the board.
A self-classified value investor, Ben Miller' s career includes accolades such as holding the title of one the longest winning streaks in mutual fund history when he managed the Legg Mason Value Trust fund and beat the S&P 500 for 15 consecutive years. While considered a value investor, Miller's approach differs from more traditional models in that he feels any stock can be a value stock, provided it trades at a discounted level to its intrinsic value.
This screen uses growth and value to find companies trading below their intrinsic value. Sales, free cash flow, PEG - historic and margin all make an appearance here.
Famous as the "father of value investing", Benjamin Graham's early experiences with his family's financial struggle motivated him to achieve financial security. He's famous for his security analysis approach to investing, opting for investments worth substantially more than their price, creating a suitable safety margin. A firm believer in the power of fundamental analysis, Graham looked for investment opportunities at companies with strong balance sheets, low debt, above-average profit margins and adequate cash flow.
Enterprising Investor Value Screen
This screen looks for stocks trading cheap with a decent margin of safety. Earnings growth, recent dividend payments and low debt also make an appearance in this model.
Author of multiple books on investment principles, Kenneth Fisher, founded his money management firm, Fisher Investments, in 1979 and has seen a steady climb reaching $65 billion in net worth. He is currently ranked in the Forbes 400 list.
Price to Sales Guru Model
This model is predicated on growth but also ensures there are some signs of a healthy business in play too.
Using these screens above, you can identify businesses in today's market that your favourite investment guru would have had on their watch list, and make your choices accordingly. However, you're not bound by the parameters defined in each of the guru screens. You can further adapt them to include parameters of your own to suit your unique screening requirements, so that your criteria are included in the filters.
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