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Contrarian to the core

A mutual fund manager, John Neff follows a contrarian strategy and focuses on stocks available at cheap valuations

Contrarian to the core

John Neff headed Vanguard's Windsor Fund between 1964 and 1995, one of the best performing mutual funds in his time. A contrarian investor to the core, Neff's technique focuses on out of favour quality companies. He would typically buy them in times of crisis. He had a healthy aversion to momentum stocks.

Neff is also called a 'low price-earnings investor'. He looks for stocks that are cheap in relation to their total return (earnings growth plus dividend yield divided by the P/E ratio).

He has authored John Neff on Investing.

Modified Neff filters for Indian markets
1. P/E less than 15
2. Positive free cash flow in the last three years
3. Sales and earnings growth in the last five years between 7 per cent and 50 per cent
4. Total return ratio - 5Y EPS growth plus dividend yield divided by current P/E - of more than 1
5. ROE more than the 15 per cent

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