Mandatory

1. A PEG of under 1.0 for large portfolios and of under about 0.75 for smaller portfolios.

2. A prospective PER of not more than 20.

3. Strong cash flow and, in particular, cash flow per share in excess of EPS for the last reported year and for the average of the previous five years.

4. Low gearing, preferably under 50%, or, even better, positive cash balances.

5. High relative strength in the previous 12 months coupled with high relative strength in the preceding month or three months.

6. A strong competitive advantage.

7. No active selling by a cluster of directors.

Highly desirable

1. Accelerating EPS, preferably linked to the capacity to clone the company's activities.

2. A number of directors buying shares.

3. A dividend yield. (That is to say, a company that pays dividends is nice, as opposed to one that pays no dividend).

4. Slater used to say a small market capitalisation was highly desirable, but places less emphasis on this now.

5. High "owner earnings".

Bonus factors

1. A low price-to-sales ratio (PSR)

2. Something new.

3. A low price-to-research ratio (PRR)

4. A reasonable asset position.

Slater has a reputation as a fairly fickle shareholder, he rarely holds for more than a few years and tends to sell quickly if news-flow is bad. "Zulu" investors should be prepared for high portfolio turnover and needing to take a very active role in managing (and trading) their portfolio. Slater almost always sells his shares when the PEG has risen above one, dumping this stock for another low PEG stock.

You will note that Slater's approach includes momentum. He is a strong believer in buying stocks that have outperformed the market historically, and while he considered this a desirable trait in his early days, since reading What Works on Wall Street, Slater has decided that high relative strength is one of the most important criteria. He looks for relative strength over the last year, and over the last month or few months. In many ways, Slater's approach can be mingled with William J. O'Neil's CANSLIM approach to produce a highly successful hybrid growth approach.