This week’s Screen of the Week is the John Neff Value model, based on the book “Neff on Investing” Each week, we’ll showcase Validea’s Guru Stock Screener, a tool that applies the wisdom of these investment legends and other fundamental strategies to assist in new investment idea generation. Discover how to uncover potential winning stocks by leveraging investment styles that range from value, growth, quality and beyond.
Neff’s approach was “relatively prosaic” and “dull” because it focused on the market’s unloved. Neff identified these stocks using the price/earnings ratio, seeking stocks with P/Es that were between 40 to 60 percent of the market average. From this group, he looked for firms with steady, sustainable EPS growth (between 7 percent and 20 percent per year, and driven by sales growth), as well as positive free cash flows. He also used what he called the “total return/PE” ratio, which combined a stock’s growth rate and dividend yield and divided that by its P/E ratio to find good values. The variable underscored Neff’s belief that strong dividends were an often-overlooked part of how investors could beat the market.
– Passes the John Neff Value model with at least 80% score or better.
– Passes at least four other guru models with at least an 80% score.
- CI | CIGNA
- GROUP EPD | ENTERPRISE PRODUCTS PARTNERS LP
- URI | UNITED RENTALS, INC.
- YY | JOYY INC (ADR)
- DKS | DICK’S SPORTING GOODS INC
- ACGL | ARCH CAPITAL GROUP LTD.
- ADRNY | KONINKLIJKE AHOLD DELHAIZE NV (ADR)
- BERY | BERRY GLOBAL GROUP INC
- KB | KB FINANCIAL GROUP, INC. (ADR)
- KFY | KORN FERRY
- MUFG | MITSUBISHI UFJ FINANCIAL GROUP INC (ADR)
- PENN | PENN ENTERTAINMENT INC
- PFSI | PENNYMAC FINANCIAL SERVICES INC
- IBAAY | INDUSTRIAS BACHOCO, S.A.B. DE C.V. (ADR)
About John Neff While known as the manager with whom many top managers entrusted their own money, Neff was far from the smooth-talking, high-profile Wall Streeter you might expect. He was mild-mannered and low-key, and the same might be said of the Windsor Fund that he managed for more than three decades. In fact, Neff himself described the fund as “relatively prosaic, dull, [and] conservative.” There was nothing dull about his results, however. From 1964 to 1995, Neff guided Windsor to a 13.7 percent average annual return, easily outpacing the S&P 500’s 10.6 percent return during that time. That 3.1 percentage point difference is huge over time — a $10,000 investment in Windsor (with dividends reinvested) at the start of Neff’s tenure would have ended up as more than $564,000 by the time he retired, more than twice what the same investment in the S&P would have yielded (about $233,000). Considering the length of his tenure, that track record may be the best ever for a manager of such a large fund.