6 Growth Stocks from a Legend's Strategy


John Reese Image John Reese Founder and CEO, Validea.com And Validea Capital Management

Martin Zweig is a legendary veteran of the markets and guru of the first order, so it only makes sense to see what he has up his sleeve for the beginning of 2012, says John Reese of the Validea Hot List.

Generally, my Guru Strategies have a distinct value bias. The majority of these models—ranging from my Benjamin Graham approach to my Warren Buffett model to my Joseph Piotroski strategy—are focused on finding good, often beaten-down stocks selling at bargain prices. That is, they target value stocks.

But that doesn't mean that all of my gurus were cemented on the value side of the growth/value pendulum. In fact, the guru we'll examine today, Martin Zweig, used a methodology that was dominated by earnings-based criteria. He looked at a stock's earnings from a myriad of angles, wanting to ensure that he was getting stocks that had been producing strong growth over the long haul and even better growth recently—and that their growth was coming from the right sources.

Zweig's thoroughness paid off. His Zweig Forecast was one of the most highly regarded investment newsletters in the country, ranking number one for risk-adjusted returns during the 15 years that Hulbert Financial Digest monitored it. It produced an impressive 15.9% annualized return during that time.

Zweig has also managed several mutual funds, and was co-founder of Zweig Dimenna Partners, a multibillion-dollar New York-based firm that has been ranked in the top 15 of Barron's list of the most successful hedge funds.

Before we delve into Zweig's strategy, a few words about the man himself.