Martin Zweig

Martin Zweig

Martin Zweig was one of the most influential and successful investment advisors on Wall Street until his death in 2013. He is perhaps best known for his bestselling book Winning on Wall Street. Over a 15-year period from 1980-1995, his Zweig Forecast was the top market advisory and was based on exhaustive data studies. Using this information, Zweig was able to achieve the highest risk-adjusted return of any market advisory service during that time. He also invented the put/call ratio, which has since become a well-known and much-used market indicator.

Summary

Zweig’s strategy is based on identifying companies with strong growth in earnings and sales and which exhibit a reasonable price-earnings ratio given the company's growth rate, insider buying (or at least an absence of heavy insider selling) and relatively strong price action. For a stock to be considered, it must meet many earnings-related criteria that indicate that in the long term its earnings growth is at a high rate: it is consistent over several consecutive years, has accelerated in recent quarters and is sustainable (meaning it is driven by sales growth, not cost-cutting measures). Zweig’s strategy also looks to ensure that a firm's debt/equity ratio is low compared to its industry average. Finally, a company needs to meet all these criteria and not be too expensive.

Success Formula Winning On Wall Street

  1. Financial and Real Estate Sector is excluded
  2. MktCapM is >= US$ 300 million (basis year 2000) adjusted yearly
  3. EPS growth % from Continuing Operations between latest FQ and same quarter one year prior is > 0
  4. EPS growth % from Continuing Operations between FQ -1 and same quarter one year prior is > 0
  5. EPS growth % from Continuing Operations between latest FQ -2 and same quarter one year prior is > 0
  6. EPS growth % from Continuing Operations between latest FQ -3 and same quarter one year prior is > 0
  7. Sales Growth Rate % between last FQ and same quarter one year prior is > then between FQ -1 and same quarter one year prior
  8. Trailing 12 month EPS from Continuing Operations is > EPS from Continuing Operations 1y ago
  9. EPS from Continuing Operations 1 year ago is > 2 years ago
  10. EPS from Continuing Operations 2 years ago is > 3 years ago
  11. EPS growth % over last 3y is > 15%
  12. Latest filing P/E ratio is > 5
  13. Latest filing P/E ratio is < 1.5x median P/E ratio for the screening universe
  14. Relative Price Strength over the last 26 weeks is > 0
  15. Average trading volume for last 3m is in top 25% of screening universe

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

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