Meta Description: Discover Jim Slater’s Zulu Principle investing strategy, how it delivered 1,300% returns, and why it still beats markets today.
Jim Slater’s Zulu Principle: The Forgotten Investing Strategy That Still Works
What if I told you one of Britain’s most successful investors created a strategy so powerful it delivered over 1,300% returns between 2011 and 2025 — yet his name is barely remembered today?
We’re talking about Jim Slater and his legendary Zulu Principle, a systematic approach to stock selection that has consistently outperformed the market for decades.
In the 1970s, Slater was a household name in Britain’s financial world. He pioneered rules-based investing long before computers and algorithmic systems made it mainstream. His timeless formula — focusing on quality, value, and momentum — remains relevant even in today’s volatile environment shaped by COVID, inflation, and rising interest rates.
This article explores Slater’s journey, his strategies from the 1960s to the refined Zulu Principle of the 1990s, and why modern backtests confirm his methods still work today.
Jim Slater’s Early Investing Rules
In 1959, with no access to real-time market data, Slater devised his own backtesting method. He painstakingly reviewed years of Investors Chronicle and Stock Exchange Gazette magazines to identify patterns in winning stocks.
From this, he created his “Earning Situations” strategy — targeting turnaround companies with recent earnings growth but low valuations due to lingering market skepticism.
In 1963, Slater published his Nine Capitalist Rules, which became the foundation of his success:
- Dividend yield of at least 4%.
- Earnings growth in 4 of the last 5 years.
- Earnings doubled in the last 4 years.
- Optimistic chairman’s statement.
- Reasonable liquidity position.
- No vulnerability to exceptional risks.
- Reasonable asset value.
- Not family-controlled.
- Shares must carry voting rights.
These rules combined value, growth, and financial strength — decades before “GARP” (Growth at a Reasonable Price) became popular. His Capitalist Portfolio returned 68.9% in two years versus the market’s 3.6%.
The Evolution: The Zulu Principle
By the 1990s, Slater refined his approach into what he called the Zulu Principle. His book outlined six key filters:
- PEG Ratio < 0.75 → Growth at a reasonable price.
- P/E Ratio < 20 → Avoiding overvalued stocks.
- EPS Growth > 15% → Strong profitability momentum.
- Relative Strength > 0% → Stocks outperforming the market.
- ROCE > 12% → Efficient use of capital.
- Market Cap £20M–£1B → Focus on small and mid-cap growth.
His famous line “Elephants don’t gallop” explained why smaller companies outperform — they simply have more room to grow.
Importantly, Slater evolved his thinking by incorporating momentum. Initially dismissive of technical analysis, he later acknowledged its value:
“If shares are not keeping up with the market, you should be on red alert.”
Zulu Principle in Modern Backtests
Recent backtesting by Stockopedia applied Slater’s rules to global markets between 2011 and 2025. The results?
- The Zulu portfolio returned 1,300%, massively outperforming the FTSE.
- Gains were consistent, with the system beating the market nearly every year.
- Standout winners included Gaming Realms (+43% in 3 months), Games Workshop (+33% in 2017, then 14x earnings over a decade), and Xaar (+40% in 2013).
Even during challenging times like COVID, inflation spikes, and rate hikes, the strategy still identified strong winners.
Why the Zulu Principle Works
Slater’s system combines three timeless factors that academic finance has repeatedly validated:
- Quality: Profitable companies with efficient capital use.
- Value: Reasonable valuations measured by PEG and P/E.
- Momentum: Stocks already outperforming peers.
This systematic mix helps investors avoid emotional traps like panic selling or holding onto losers. Quarterly rebalancing enforces discipline, forcing you to sell underperformers and rotate into new winners.
In essence, the Zulu Principle is not just about numbers. It’s about creating a psychological framework that keeps investors consistent, rational, and systematic.
Applying the Zulu Principle Today
What should investors take away from Slater’s work?
- Stick to Rules → Define objective criteria for stock selection.
- Focus on Small & Mid-Caps → Higher growth potential than large caps.
- Embrace Momentum → If a stock is underperforming, the market may know something you don’t.
- Rebalance Regularly → Discipline beats emotion in the long run.
- Adapt When Needed → If few stocks qualify, slightly relax criteria or expand your search globally.
With modern tools like Stockopedia or Screener.in, you can replicate Slater’s methods instantly — something that took him weeks with old magazines.
Final Thoughts
Jim Slater may not be widely remembered today, but his Zulu Principle remains one of the most effective systematic investing frameworks ever devised. It blends growth, value, and momentum in a disciplined way that still beats markets decades later.
The real genius of Slater’s approach lies in its simplicity and timelessness. You don’t need predictions or gut instincts. You just need a set of proven rules and the discipline to follow them.
So the question is: will you apply the Zulu Principle in your portfolio today?
Disclaimer: This article is for educational purposes only and should not be considered financial advice. Please consult your financial advisor before making investment decisions.
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