Mark Slater Backs Growth Stocks.... At A Price

16th Apr '11 by Edward Croft

10 comments 25311 reads

Most investors go to the Master Investor conference to come away with some stock ideas which is precisely why the best attended speech today was by Mark Slater. While some of the speakers at the show have mixed agendas, Slater is a classic growth company investor and speaks about his stock picks with the same integrity and assuredness as his famous father Jim. It’s a style that has made the pair strong favourites amongst private investors and while he couldn’t attend the show in person, his pre-recorded presentation didn’t disappoint.

The Slater family champion a set of strict growth investment criteria focused around the PEG ratio - the goal being to buy strong, cash generative growth companies at reasonable valuations. These criteria haven’t really changed since they were delineated in Jim Slater’s very popular book ‘The Zulu Principle’ in the early 1990s and both Slaters continue to preach from that script.

Mark actually helped his father research the Zulu Principle books and invests his extremely successful fund, MFM Slater Growth, very much according to that set of criteria. While he has been known to take advantage of special situations at opportunistic moments such as at the 2009 market lows he currently sees little value in asset plays or recovery situations in the current market, only highlighting 21st Century Group as detailed below. Today he’s focused on buying classic Zulu Principle growth stocks at reasonable valuations - a strategy that he’s shown in practice has a tremendous track record for market beating returns.

Market Outlook

Slater is not as worried about the market as he was a few months ago noting that all investors have been very focused on the big picture issues at large for some time. He maintains that equities are reasonable value and that they are ‘by far the most attractive asset class’. But he cautioned that with the ongoing deleveraging of the consumer and increased tax cost to society that investors have to remain cautious and avoid the worst impacted sectors.

Investment Process

He discussed his investment methodology which essentially boils down to a three step process.

Quantitative Screening Screening the market with the now familiar set of criteria. A PEG < 1, consistent EPS Growth and Cashflow > EPS. Perhaps stemming from his practice of investing larger sums of money in an institutional setting, he…

Unlock with Email

Unlock with Google

Already have an account?
Login here

MrContrarian

18th Apr '11

I've set up a Master Investor 2011 tips tracker: http://www.freesharedata.com/mi2011

Miae

19th Apr '11

I am new here but this article is very useful and helps me to understand quickly.

Isaac

7th May '11

Cape (LON:CIU) - While Cape has risen enormously from its bottom in 2009, its still only valued at 11 times earnings. With 15% eps growth likely for the next 5 years Slater quotes the management as saying that Cape is about to enjoy its ‘Golden Years’. In growth markets especially in the Pacific Rim and the UK government unlikely to ignore its nuclear decommissioning issues for long, Cape is well positioned. Cash generative and with debt all but paid down Slater named Cape as a top pick.

Looks like Slater has been dumping his holding in Cape.

What is interesting is they talked up this stock in the conference a few weeks back. On the 12th April they published an RNS stating their holding had gone below 4% : http://www.investegate.co.uk/Article.aspx?id=201104121103227521E

Infact yesterday they released another RNS stating Slater has sold more shares and is now below 3% : http://www.investegate.co.uk/Article.aspx?id=201105061512071322G

Don't understand why a leading fund manager has talked up a stock in a big Investor conference and subsequently dumped the shares.

I don't hold any stocks tipped in the conference, quite why people think they can go to these conferences & take tips from these 'experts' to make money is beyond me.

Buying on tips is a mugs game, Think for yourself and do your own research.

marben100

Perhaps he sold for the same reason I sometimes reduce my holding in a company, even though I like their prospects: risk management.

Cape (LON:CIU) has risen strongly over the last year. Even after the recent sales, Slater's holding is still worth ~£13m. Perhaps, before reducing, that holding was uncomfortably large?

Nevertheless, I agree with you and don't like to see someone talking up a stock and selling shortly afterwards! The "optics" are not exactly good (unless he declared that he was reducing).

Mark

thebuffoon

8th May '11

So, Isaac, why did you go; what did you get from going to the conference?

Buffy

StrollingMolby

10th May '11

21st Century Technology (LON:C21) is proving to be Mark Slater's best tip of the Master Investor Show, up 22% since the tip. Worth remembering that Slater Investments has 15.3% of the co, whilst activist Peter Gyllenhammar's last reported holding was 29.5%.

With the unused Mitcham property up for sale and volumes up this week, there is certainly a feeling of value being outed here.

4th Aug '11

An example of why you should'nt buy stocks tipped in a big private investor show......especially so soon after the event.

Cape (LON:CIU) (chart posted doesn't work).

9th Nov '11

Well done Mark - Looks like you made a good move in selling your 11 times earnings. With 15% eps growth likely for the next 5 years......Thankfully I ignored your opinion.

2 Year chart. Click to open a chart window

I honestly think there should be laws in place against prolific fund managers who go to Big Investor shows that talk up a stock such as CIU back In April to then reduce their holding from 7.7% in April to 4.7% last month.

I just think it is outrageous & it makes me really angry - I don't Invest on the back of these tips so I am not affected.

But i'm sure others have & I kinda feel sorry for these people as they have lost money.

Isaac,

"I honestly think there should be laws in place against prolific fund managers who go to Big Investor shows that talk up a stock such as CIU back In April to then reduce their holding from 7.7% in April to 4.7% last month."

I don't see why there should be any obligation on a largeholder such as Mark Slater to hold onto a position following his comments at a conference. I've attended the last three of these shows and looked forward to hearing Slater explain his thinking and in particular his stock suggestions, which to be honest can be guessed fairly accurately because his funds' top tens are available online (& via regulatory announcements). In any event, he discloses that his funds hold, which you'd certainly wish for as demonstration of his conviction - and the event was seven months ago!

It's unreasonable to expect a fund manager to publicly state his views & put his reputation on the line at such an event, which are only his views at a snapshot in time, and then not react to events as they unfold, whether macro or micro to Cape in this instance. Do you not topslice your winners? He may well have built the position sub £1 so it's hardly surprising with the price falling back over the summer.

The fund factsheets are not available to retail investors but Top Tens can be seen on Trustnet to get a heads-up on new entrants if anyone wants to follow on his coat-tails:

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=WXF98A

or look for news on a newswire:

http://www.investegate.co.uk/Index.aspx?searchtype=1&words=slater+investments

We're all big boys and should be capable of doing our own research, and in turn taking the rough with the smooth. And let's not forget that you are not paying him a fee for his ideas, so his duty of care is pretty limited!

SM

Mark Slater backs Growth Stocks.... at a Price

Market Outlook

Investment Process

Unlock the rest of this article with a 14 day trial

About the Author

Edward Croft

10 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...