"Jim Slater Left School At 16 and Climbed The Corporate Ladder Fast - Using His PEG Ratio He Make Fortunes"

 "He Brought To Life the PEG Ratio Which is Now a Favourite Finacial Ratio When Analysing Company Shares"

Introduction

Jim Slater left school at the early age of 16.  He first articled to a firm of chartered accountants and qualified in 1953 at the age of 24.

The following year he joined a small metal finishing compay in London.  After only three months he made it up to the position of general manager and was introduced to Extel cards - his first introduction into Stock Market investing.

In 1956 he worked in a small vehicle company as the company secretary progressing to commercial director.

By 1962 he was appointed commercial manager of Leyland Group.  He rose quickly in the motor industry but always wanted to build up his own personal fortune in the Stock Market.

"The Investment Method of Jim Slater"

Jim Slater pioneered a system that looked for shares with below average rating. He couldn't understand why some shares had low price/earnings  ratios yet good profits.

So he started out with £2,000 investing to his beliefs and doubled his money in 6 months.  It was at this point that he went to his bank and borrowed 4 times what he then had.

Between the ages of 32 and 35 he had turned his £2,000 into £50,000 in his own time.

In 1963 he wrote a column in the Sunday Telegraph on share investing and called it "The Capitalist."

He developed a set of standards which resulted in substantial capital appreciation. The criteria that met his standard was that a share should have an above average earnings yield (or below average P/E Ratio) with above average growth prospects.

Here is what he looked for in a company:

1. The dividend yield must be at least 4%
2. Equity earnings must have increased in at least four out of the last 5 years
   
3. Equity earnings must have at least doubled over the last 5 years
4. The latest Chairman's statement must be optimistic
5. The company must be in a reasonable liquid position
6. The company must not be vulnerble to exceptional factors
7. The company must have a reasonable asset value
8. The company should not be family controlled
9. The shares should have votes

Jim Slater's Capitalist portfolio ran for two years in the Sunday Telegraph and gained 68.9% against a market average of only 3.6%.  It was a huge success.

A part of his method was to cut losses and run profits.  Slater reckoned that the majority of investors do exactly the opposite.  They run losses and cut profits. 

However, he did admit that it took will power to cut losses and run profits.

"The Year That Jim Slater Set Up
His Own Business"

In 1964 Jim Slater left Leyland to set up his own business.

He had been looking for a listed "shell".  After one failed attempt he then bought into a pure shell, a company with no operations but a long lease on a property.  Together with his partner, Peter Walker, he re-named the company Slater Walker and the rest, as they say, is history.

During the next 5 years (1964-1968) Slater Walker was a conglomerate which grew fast by exchanging its own highly rated shares for less valued companies.  The range of companies Slater Walker acquired was £0.3 million to £34 million.

Sadly, Slater Walker did not survive the secondary banking crisis of 1973-4.

From 1975 until his death in 2015 Jim Slater continued to amass a fortune from the Stock Market, but privately. 

"Jim Slater 'Invents' His PEG Ratio"

From 1992, Jim Slater again got into the public eye, but this time as an author. His first book 'The Zulu Principle' and its sequel: 'Beyond the Zulu Principle' made popular the idea of investing in small capitalisation stocks and the use of the Price Earnings Growth (PEG) Ratio.

And no, Slater did not 'invent' the PEG but he was guilty of making it popular among small investors as a stock picking tool.

As you are aware, if you've read snippets on this website, or if you happen to follow Warren Buffett, Value Investing and Growth Investing are the two philosophies that are used most.

What the PEG Ratio did was to combine the two elements into one convenient ratio.

In simple terms, the Price Earnings Ratio is divided by the expected growth rate, thus resulting in the Price Earnings Growth Ratio. 

Slater's philosophy was to weed out smaller companies.  He reckoned that big companies hardly double in size but small ones can. And they did for him.

He also liked to focus on niche industries.  He didn't want to know a little about everything he wanted to know a lot about a few things. 

It served him well.

"Books By Jim Slater"

The Zulu Principle by Jim Slater

The Zulu Principle is central to Jim Slater's strategy. 

Jim gives the secrets to his identifying of growth shares in smaller companies. But not just growth shares, he elaborates on cyclical shares as well as shell and leading shares. 

He also goes into creative accounting, portfolio management and other types of share. But the big idea is Jim's strategy - the PEG Ratio. 

From this book you will learn exactly when to buy shares using his method (PEG) and just as importantly, when to sell them. Or to paraphrase the tagline to his book: "Making Extraordinary Profits From Ordinary Shares."

  'Zulu Principle' can be found here:

Beyond The ZuluPrinciple by Jim Slater

The aim for all private investors is to make the maximum possible profit from their investments. 

'Beyond The Zulu Principle' is a sequel to Jim Slater's first book 'The Zulu Principle.' And, like his original book, this one focuses on growth shares.

Jim Slater reckons he has found a major anomaly in the markets that should help private investors make exceptional returns. And in this book he shows  how.  He goes on to elaborate how to choose shares that operate in the right sector that have an advantage over their competitors.

He also details how he takes advantage of director dealings, changes of CEO, relative strength and cash flow accelerating earnings.

The book is an ideal companion to the original, and you can get it right here:

How To Become a Millionaire by Jim Slater and Tom Stevenson

The book promises to give you all the tools you need to turn your personal finances into personal wealth. 

The authors' have a very straight-forward and easy to understand  style by explaining the power of compounding and how by saving small amounts you can produce a very significant cash sum.

The book is based on Jim Slater's methods of getting extraordinary results from ordinary shares.  It is ideal for beginners and experienced investors. Not just an easy read but a MUST read.  Get it right here:

Investment Made Easy by Jim Slater

This book is another gem by Jim Slater.

Written in an easy-to-readstyle that any private investor, no matter what level, can understand.

We like Jim Slater's style of writing and we like even more his style of picking stock market winners.  He was very similar to Warren Buffett, not quite as successful, but he didn't do too bad.

If you are at all serious about investing, then you need to build up your own library of investment books and this volume should be one of them.  You can get your hands on one right here:

Return to Go by Jim Slater

This book titled: 'Return To Go' is effectively Jim Slater's autobiography. Inside its pages he set out his early plans and visions with regards to company acquisitions.

Upon acquiring a company his strategy was to maximise the return of their assets and if they didn't fit in with his plans - he sold the unwanted bits.

He became known as the "asset stripper" a term not endeared to those that were affected. 

In this revised edition of his autobiography he added a section on stock investing, something that he became rather good at.  His theory of Price Earnings Growth was, and still is, adopted by many.

Add this entralling book to your library by clicking right here:

Conclusion

Jim Slater was a revelation in the 60s and 70s.

He devised a system for finding under-valued companies, and made a fortune by doing so.

He was less fortunate in the corporate world although he did have great success until his company, Slater Walker, fell victim to the secondary banking crisis of 1973-75.

After that, Jim had no desire to ever get into the corporate world ever again.

After 1975 he kept a quieter, although very busy, profile.

His autobiography - 'Return To Go' - tells the story in his own words.

In his own words, he had this to say about investing: 

"Start with the basics, select a system, work at it, read regularly, monitor results,and keep striving to improve.  If you have the nervous energy, and the stamina, your efforts will be fully rewarded."

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