William J. O'Neil

Investment Style
O'Neil blends a mixture of quantitative and qualitative strategies in his performance-oriented investing approach. In brief, his investment style is to seek out only those growth stocks that have the greatest potential for swift price rises from the moment they are purchased.

Essentially, Bill O'Neil's motto is "buy the strong, sell the weak." His criteria for identifying a stock that's about to head for the stratosphere are summarized in his well-known acronym CANSLIM:

C – Current quarterly earnings per share have increased sharply from the same quarters' earnings reported in the prior year (at least 25%).

A – Annual earnings increases at a compound rate of no less than 25% (P/E is unimportant – probably in the range of 20 to 45 with these stocks) annually over the last five years.

N – New products, new management, and new highs. Stocks with a good "story."

S – Supply and demand. The less stock available, the more buying will drive up the price. Look for stocks with 10 to 12 million shares outstanding.

L – Leaders and laggards. Stick with those stocks that outperform and shed those that underperform.

I – Institutional ownership. Favor companies that are "underowned" by the top professional investors. (For related reading, see Institutional Investors And Fundamentals: What's The Link?)

M – Market direction. Buy stocks on major downturns, but avoid purchases after a decline of 10% or more gets underway.

Publications
-> " How To Make Money In Stocks" by William J. O'Neil (1988).
-> "24 Essential Lessons For Investment Success" by William J. O'Neil (1999).
-> "The Successful Investor" by William J. O'Neil (2003).

Benjamin Graham

Investment Style
Morningstar's online Interactive Classroom carries this anecdote about the results of Ben Graham's investing style:

"In 1984, [Warren] Buffet returned to Columbia to give a speech commemorating the fiftieth anniversary of the publication of "Security Analysis". During that speech, he presented his own investment record as well as those of Ruane, Knapp, and Schloss [other successful investment managers who were students of Graham at Columbia]. In short, each of these men posted investment results that blew away the returns of the overall market. Buffett noted that each of the portfolios varied greatly in the number and type of stocks, but what did not vary was the managers' adherence to Graham's investment principles."

It is difficult to encapsulate Benjamin Graham's investing style in a few sentences or paragraphs. Readers are strongly urged to refer to his "The Intelligent Investor" to obtain a more thorough understanding of his investment principles.

In brief, the essence of Graham's value investing is that any investment should be worth substantially more than an investor has to pay for it. He believed in thorough analysis, which we would call fundamental analysis. He sought out companies with strong balance sheets, or those with little debt, above-average profit margins, and ample cash flow.

He coined the phrase "margin of safety" to explain his common-sense formula that seeks out undervalued companies whose stock prices are temporarily down, but whose fundamentals, for the long run, are sound. The margin of safety on any investment is the difference between its purchase price and its intrinsic value. The larger this difference is (purchase price below intrinsic), the more attractive the investment - both from a safety and return perspective - becomes. The investment community commonly refers to these circumstances as low value multiple stocks (P/E, P/B, P/S).

Graham also believed that market valuations (stock prices) are often wrong. He used his famous "Mr. Market" parable to highlight a simple truth: stock prices will fluctuate substantially in value. His philosophy was that this feature of the market offers smart investors "an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal."

Publications
-> "Security Analysis" (1934) by Benjamin Graham and David Dodd
-> "The Intelligent Investor" by Benjamin Graham (1949)
-> "Benjamin Graham: The Memoirs Of The Dean Of Wall Street" by Benjamin Graham and Seymour Chatman (editor) (1996)
-> "Benjamin Graham On Value Investing: Lessons From The Dean Of Wall Street" by Janet Lowe (1999)

Philip Fisher

Investment Style
Fisher achieved an excellent record during his 70 plus years of money management by investing in well-managed, high-quality growth companies, which he held for the long term. For example, he bought Motorola stock in 1955 and didn't sell it until his death in 2004.

His famous "fifteen points to look for in a common stock" were divided up between two categories: management's qualities and the characteristics of the business. Important qualities for management included integrity, conservative accounting, accessibility and good long-term outlook, openness to change, excellent financial controls, and good personnel policies.

Important business characteristics would include a growth orientation, high profit margins, high return on capital, a commitment to research and development, superior sales organization, leading industry position and proprietary products or services.

Philip Fisher searched far and wide for information on a company. A seemingly simplistic tool, what he called "scuttlebutt," or the "business grapevine," was his technique of choice.

He devotes a considerable amount of commentary to this topic in "Common Stocks And Uncommon Profits". He was superb at networking and used all the contacts he could muster to gather information and perspective on a company. He considered this method of researching a company to be extremely valuable.

Publications
-> "Common Stocks And Uncommon Profits" by Phillip A. Fisher(1958)
-> "Conservative Investors Sleep Well" by Phillip A. Fisher (1975)
-> "Developing An Investment Philosophy" by Philip A. Fisher (1980)

David Dreman

Investment Style
It is reported that Dreman came to contrarian investing the hard way. In 1969, Dreman, a junior analyst at the time, was following the crowd as the shares of companies with negligible earnings skyrocketed. He is quoted as saying, "I invested in the stocks du jour and lost 75% of my net worth." As a result of that painful lesson of following the herd, he became fascinated with how psychology affects investor behavior and became a contrarian investor.

In an interview for Kiplinger's Personal Finance Magazine in 2001he explained his approach: "I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time."

Publications
-> "Contrarian Investment Strategy: The Psychology of Stock Market Success" by David Dreman (1980)
-> "The New Contrarian Investment Strategy" by David Dreman (1982)
-> "Contrarian Investment Strategies: The Next Generation by David Dreman (1998)

John (Jack) Bogle

Investment Style
In simple terms, Jack Bogle's investing philosophy advocates capturing market returns by investing in broad-based index mutual funds that are characterized as no-load, low-cost, low-turnover and passively managed. He has consistently recommended that individual investors focus on the following themes:

-> The primacy of investing simplicity
-> Minimizing investment-related costs and expenses
-> The productive economics of a long-term investment horizon
-> A reliance on rational analysis and an avoidance of emotions in the investment decision-making process
-> The universality of index investing as an appropriate strategy for individual investors

Publications
-> "Bogle On Mutual Funds" by John C. Bogle (1994)
-> "Common Sense On Mutual Funds: New Imperatives For The Intelligent Investor" by John C. Bogle (1999)
-> "John Bogle On Investing: The First 50 Years" by John C. Bogle (2000)
-> "The Little Book Of Common Sense Investing: The Only Way To Guarantee Your Fair Share Of Stock Market Returns" by John C. Bogle (2007)
-> "The Vanguard Experiment: John Bogle's Quest To Transform The Mutual Fund Industry" by Robert Slater (1996)

Warren Buffet

Investment Style
Warren Buffett's investing style of discipline, patience and value has consistently outperformed the market for decades.

John Train, author of "The Money Masters"(1980), provides us with a succinct description of Buffett's investment approach: "The essence of Warren's thinking is that the business world is divided into a tiny number of wonderful businesses – well worth investing in at a price – and a large number of bad or mediocre businesses that are not attractive as long-term investments. Most of the time, most businesses are not worth what they are selling for, but on rare occasions the wonderful businesses are almost given away. When that happens, buy boldly, paying no attention to current gloomy economic and stock market forecasts."

Buffett's criteria for "wonderful businesses" include, among others, the following:
-> They have a good return on capital without a lot of debt.
-> They are understandable.
-> They see their profits in cash flow.
-> They have strong franchises and, therefore, freedom to price.
-> They don't take a genius to run.
-> Their earnings are predictable.
-> The management is owner-oriented.

Publications
Buffett has not, as yet, authored any books. However, his annual letters to the shareholders in Berkshire Hathaway's annual report are a suitable substitute. Back copies of these 20-page masterpieces of investing wisdom are available from 1977 through 2006 (updated annually) from Berkshire's Website.

-> "Buffett: The Making of an American Capitalist" by Roger Lowenstein (1996).
-> "Warren Buffett Speaks: Wit And Wisdom From The World's Greatest Investor" (1997)
-> "The Warren Buffett Way" by Robert G. Hagstrom (2005)