Tuesday, December 9th, 2008
Growth legend Richie Freeman’s investing rules
Richie Freeman, who runs Legg Mason Partners Aggressive Growth fund, has had a tough year, like a lot of other legends.
But he is still one of the most successful growth investors out there. Though termed ‘aggressive growth’ (usually meaning a momentum-style fund), Freeman’s fund actually uses a buy-and-hold growth philosophy.
There is an excellent interview here, and from it I’ve outlined his strategy:
* Freemand uses a bottoms-up, stock-picking approach
* He seeks relatively unknown companies with little Wall Street coverage
* He looks for strong management track record and experience
* He likes management compensation to be tied to stock performance
* Freeman is seeking stocks with products that consumers are “virtually compelled” to use, including certain drugs (he wants “long-term trends, not fads”). The product should be unique enough to sustain an advantage over competitors, giving “product longevity”
* He will consider promising companies that could be profitable within two to three years
* He likes a solid balance sheet with little or no debt
* Freeman wants to buy growth cheap: the stock needs to be priced at less than two times annualized earnings growth
* He tolerates short-term earnings disappointments, if long-term results are strong
* His portfolio has extremely low turnover: annualized turnover is just 5% to 10% and the average stock is held for 14 years
Word Count: 211. This entry was posted on Tuesday, December 9th, 2008 at 4:59 am and is filed under Richie Freeman. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
