The Greatest Investors: John Neff
|Source: CFA Institute|
|Most Famous For:||John Neff\'s average annual total return from Vanguard\'s Windsor Fund during his 31-year tenure (1964-1995) as portfolio manager was 13.7%, against a similar return from the S&P 500 Index of 10.6%. He showed a great consistency in topping the market\'s return by beating the broad market index 22 times during his tenure and was regularly in the top percent of money managers.
He was considered the "professional\'s professional," because many fund managers entrusted their money to him with the belief that it would be in safe hands.
He joined the Wellington Management Co. in 1964, becoming the portfolio manager of the
John Neff did not describe himself as either a value or contrarian investor, preferring instead to characterize his investing approach to one of buying "good companies, in good industries, at low price-to-earnings prices." Despite his value-contrarian investor disclaimer, Neff's investment management career shows a considerable amount of this type of investing strategy.
Neff practiced portfolio concentration over diversification. He pursued stocks of all sizes – large, small, and medium – as long as they evidenced low P/E ratios, which he described as "low P/E investing." Two of Neff's favorite investing tactics were to buy on bad news after a stock had taken a substantial plunge and to take "indirect paths" to buying in to popular industries. This involved, for example, buying manufacturers of drilling pipe that sold to the "hot stock" (too pricey for Neff) oil service companies.
He preached against participating in "adrenaline markets" (momentum driven) and preferred face-to-face meetings with a company's management to assess its integrity and effectiveness. For most individual investors, this type of contact is not a realistic possibility; however, using Neff's rigorous fundamental analysis techniques as applied to a company's financials will turn up enough management performance indicators to compensate for the inability to directly interact with a company's managers. (For more insight, see Evaluating A Company's Management and Putting Management Under The Microscope.)
As noted by Ryan Furman in his July 2006 interview with Neff for the Motley Fool, "most great investors are serious bookworms." John Neff is no exception: "He gained notoriety for taking all of his weekly Wall Street Journal copieshome for a second read during the weekend." Furman also reported that Neff reads Value Line religiously. Stock investors would be well advised, like Neff, to give these two sources of investing guidance as much attention as possible.
- "John Neff On Investing" by John Neff and Steven L. Mintz (2001)
"It's not always easy to do what's not popular, but that's where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognized."
"I've never bought a stock unless, in my view, it was on sale."
"Successful stocks don't tell you when to sell. When you feel like bragging, it's probably time to sell."
The Greatest Investors: William J. O'Neil
The practice of targeting large companies or customers.
A clearly defined route to profitability as described in a business ...
A freelancer is an individual who earns money on a per-job or ...
Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
Donation-based crowdfunding is a way to source money for a project ...
An insurance syndicate that bases its organizational structure ...
Understand what a company's breakeven point is and what its payback period is. Learn why a company would want to track both ...
Discover how syndicated loans work, why they are beneficial for businesses, and what is considered a reasonable interest ...
Find out why it is important to safeguard your general partnership in the even that one member becomes disabled, dismembered ...
Discover the significant barriers to entry, such as the necessity for high capital expenditures, for new companies in the ...