John Neff on Investing

Investing is not a very complicated business; people just make it complicated. You have to learn to go from the general to the particular in a logical, sequential, rational manner.

The debate over top-down versus bottom-up investing has always seemed a little fuzzy to Inc. I just keep an eve on the economy and ask, where is a sector that's overdue for recognition:

Refusal to partake in groupthink caused us to underperform the mar-ket by 9.8 percentage points in 1980 but cascaded to Windsor's benefit in 1981. We recovered our footing and surpassed the S&P 500 by better than 21.7 percentage points. We'd pinned our reputation to a rout of that sort.

Low p/e companies growing faster than 7 percent a year tipped us off to underappreciated signs of life, particularly if accompanied by an attention-getting dividend.

Shortcuts usually grease the rails to disappointing outcomes.

Any service that systematically updates stocks can help. I'd go through new editions of Value Line every week. I don't read, much less follow, the valuations or predictions. I studied the numbers.

M Y I N C L I N A T 1 0 N z' 0 buy out-of-favor stocks comes naturally, but by itself doesn't account for beating the market. Success also required lots of perseverance. You have to be willing to hang in when prevailing wisdom says you're wrong. That's not instinctive; more often than not, it goes against instinct.

Windsor was not fancy. As in tennis, I tried to keep the ball in play and let my adversaries make mistakes. I picked stocks with low p/e multiples primed to be upgraded in the market if they were deserving, and endeavored to keep losers at break-even levels. Usually, I returned home with more assets in the Windsor Fund than the day before. And I sl

We never salivated for the last dollar in a major move (i.e., the oil stocks). Instead, we tried to take stocks from undervalued to fairly valued. We left "greater-fool" investing to others.