Philip Town

Philip Town

Philip Bradley Town is an example of the American rags to riches story. From a career in the military to a river guide living off social security in the off-season and finally a multi-millionaire investor, Town lives Warren Buffett’s No. 1 Rule of Investing – don’t lose money. He uses a value investing approach that is highlighted in his books Rule #1, The Simple Strategy for Successful Investing in only 15 Minutes a Week! and Making Big Money is the Best Revenge! Both books have been New York Times bestsellers. Due to his success, Town is a much sought-after speaker on the Get Motivated stage.

Summary

Takeaways from Rule No. 1

 

Town’s strategy is highly appealing to beginner investors because they can put themselves into his shoes. However, Town has a tremendous amount of self-discipline when it comes to selecting stocks. He uses a set of four criteria, which he calls his Four Ms:

 

  • Meaning (what it does is understandable)
  • Moat (has a durable competitive advantage)
  • Management (CEO is honest, passionate, owner-oriented)
  • Margin of safety (50% below Sticker price, or payback time of eight years or less, or 70% of tangible book value or less)

 

These four criteria are paramount in selecting winning stocks. Town will be the first to say that investing has nothing to do with hoping, wishing or luck, but is a calculated move of buying great businesses at low prices. Seven factors drive Town’s stock strategy.

Success Formula Buffett Rule No. 1

  1. MktCapM is >= US$ 600 million (basis year 2000) adjusted yearly
  2. 5y Average Return on Invested Capital >= 10
  3. Average 5y Book value per share growth % >= 10
  4. Average 5y EPS growth % >= 10
  5. Average 5y Sales Growth Rate % >= 10
  6. Average 5y Free Cash Flow growth rate % >= 10
  7. LT Debt to Free Cash Flow ratio <= 3
  8. Current Price <= Sticker price * 0.5

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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