Colin Nicholson

Colin Nicholson

Australian investor Colin Nicholson has been investing his own money for more than 45 years. With his extensive background, he also teaches technical and fundamental analysis. Core lessons can be learned in his book Think like the Great Investors in which he discusses the common cognitive errors and biases in decision making that have been discovered in behavioural finance. His most famous book is perhaps Building Wealth in the Stock Market. In Hot Stocks 2007 and Hot Stocks 2008, he goes into further detail on how he assesses market risk and finds good investments.

Summary

Nicholson is an active investor and seeks to capitalise on trends that run over several months to many years. By concentrating on second-rank industrial shares, he is able to outperform blue-chip stocks, as these industries tend to have higher gains. He has seven essential criteria for investing that are designed to keep him safe:

  1. Investment grade
  2. Rising in price
  3. Growing earnings and Dividends
  4. Moderate price earnings ratio
  5. Relatively high franked Dividend yield
  6. Appropriately low Debt to Equity ratio
  7. Return on equity above cost of capital

 

Nicholson’s driving factors can be put into two categories, Value Screen and Growth Screen.

Success Formula Building Wealth Through Shares - Value

  1. MktCapM is >= US$ 100 million (basis year 2000) adjusted yearly
  2. Latest filing P/E ratio is > 0
  3. Latest filing Dividend Yield % is > 0
  4. Latest filing RoE% > screening universe average
  5. Current P/E ratio is < screening universe average
  6. Current Dividend Yield % is > industry average
  7. Latest filing Debt to Equity ratio is <= 40%
  8. Take the top 50 stocks with the lowest distance to their 52 week high price.

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

Success Formula Building Wealth Through Shares - Growth

  1. MktCapM is >= US$ 100 million (basis year 2000) adjusted yearly
  2. Latest filing P/E ratio is > 0
  3. Latest filing Dividend Yield % is > 0
  4. Current P/E ratio is < screening universe average
  5. Current Dividend Yield % is > industry average
  6. Latest filing Debt to Equity ratio is <= 60%
  7. Take the top 50 stocks with the lowest distance to their 52 week high price.

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

Free Stock Screening Tool