Invest like Jim Slater – and Beat the Market by a Factor of 20

The veteran investor's stock-picking formula outperformed spectacularly when he invented it 50 years ago. Here are four stocks that pass his tests today

"It is only necessary to be 6 inches taller than the other people in a room to see above everyone’s heads.” 

This is Jim Slater’s recipe for investing success – that if you concentrate on learning about a particular aspect of investment, you can quickly become more knowledgable about it than “the other people in the room”.

You will then make better choices – and bigger profits.

Mr Slater, who chose undervalued growth stocks as his specialism, called this approach “the Zulu principle” (the name of his most famous book) because he noticed how quickly his wife became, relative to most people, an expert on Zulus after reading a magazine article on the subject.

“It occurred to me that if she had then borrowed all the available books on Zulus from the local library, she would have become the leading expert in the county,” he said. 

So when he decided to learn about the stock market after an illness that he feared might end his career as a company executive and force him to find another source of income, he researched the subject exhaustively before he bought his first share.

“At the time there were two weekly investment magazines, The Stock Exchange Gazette and the Investors Chronicle,” Mr Slater said. “I bought two years’ back copies of both and read through them page by page. 

“I was convinced that the stock market winners of the past would have some common characteristics. If, with the benefit of hindsight, I could develop a formula based on these characteristics, I was sure that I would be able to make my fortune.” 

Once he had come up with his system, he put it to the test in a stock-tipping column in The Sunday Telegraph, titled “The Capitalist” (pictured), which began in 1963. In two years his tips rose by 68.9pc, against just 3.6pc for the wider market.