Validea’s Strategy of the Week highlights one of our guru-based models, offering an inside look at its fundamental criteria, why they matter, and the top stocks currently favored by the strategy. This feature blends timeless investing wisdom with actionable ideas, helping you better understand and apply these proven approaches in your own investment process.
This Week’s Featured Strategy: Martin Zweig Growth Investor Model
This week, we spotlight the Martin Zweig Growth Investor Model, a strategy that seeks to balance the aggressive pursuit of growth with a conservative attention to risk management. Zweig was a master at finding this balance, blending rigorous fundamental analysis with a keen sense of market trends.
Zweig’s track record speaks for itself. His stock recommendation newsletter averaged an impressive 15.9% annualized return over 15 years, earning it the #1 risk-adjusted ranking by Hulbert Financial Digest during that period. Beyond investing, Zweig was known for his eclectic passions—owning the legendary $70 million penthouse atop Manhattan’s Pierre Hotel and collecting historical memorabilia like the gun Clint Eastwood wielded in Dirty Harry. But make no mistake—Zweig’s reputation was built on his disciplined, data-driven approach to growth investing.
Growth Investing with a Conservative Twist
Zweig was a growth investor at heart but insisted on quality and sustainability. He didn’t just chase high flyers. His methodology, which we extracted from his book, Winning on Wall Street, focused on companies with:
- Consistent, long-term earnings growth
- Accelerating earnings momentum
- Revenue growth to support profit expansion
- Reasonable valuations, Prudent debt levels & Insider buying support
For Zweig, growth without a solid foundation wasn’t worth the risk. His model aims to ensure that a company’s success is driven by genuine business strength—not by cost-cutting or accounting gimmicks.
Key Criteria for Stock Selection
- P/E Ratio: Must be greater than 5 (to eliminate ultra-risky firms) but no more than 3x the market P/E or 43, whichever is lower.
- Revenue Growth vs. Earnings Growth: Revenue growth must keep pace with earnings to ensure sustainability.
- Accelerating Sales Growth: Quarterly sales growth must be increasing, a sign of momentum.
- Positive and Persistent Earnings: Current and prior year’s quarterly EPS must be positive.
- Earnings Growth Rate for the Past Several Quarters: Recent EPS growth should be at least half the company’s long-term growth rate.
- Current EPS Growth vs. Historical Growth: The current quarter’s EPS growth must exceed the historical EPS growth rate.
- Earnings Persistence (5-Year EPS Growth): Zweig looked for annual EPS increases over five years.
- Long-Term EPS Growth: Requires at least 15% long-term EPS growth.
- Insider Transactions: Three or more insider buys, zero insider sales preferred.
Zweig’s strategy focuses on finding companies with a combination of rapid, sustainable growth and reasonable valuation—a recipe for strong long-term performance. The top performing Zweig-inspired portfolio on Validea is the 20 stock, tax efficient portfolio. Since 2003, this portfolio has returned 1,113.1%, outperforming the market by 642.2%.
Over its history, the Zweig Growth Investor Model has delivered some standout years. Its best year was 2013, when the portfolio returned +57.1%, far outpacing the S&P 500’s +29.6% gain. The strategy also posted strong results in 2024, gaining +40.1%, and in 2021, with a return of +36.5%, compared to the S&P 500’s +23.3% and +26.9% gains, respectively.
Like many growth-focused strategies, the model has experienced challenging periods. Its worst year came in 2008, during the financial crisis, when the portfolio declined -38.9%, roughly in line with the S&P 500’s -38.5% drop. Other difficult years include 2022, when the strategy fell -24.6%, and 2018, with a decline of -17.2%, reflecting the volatility that can come with high-growth investing.
* Returns are model returns and do not reflect actual trading. Full performance disclaimer
Top Rated Stocks in the Zweig Growth Investor Model
| Ticker | Company | Current Score | Latest Close | Market Cap ($mil) | PE Ratio | EPS Growth | Yield | Relative Strength | Shareholder Yield |
|---|---|---|---|---|---|---|---|---|---|
| PAGS | PAGSEGURO DIGITAL LTD | 92% | $8.52 | $2,653 | 7.3 | 15.5% | 0.0% | N/A | -0.9% |
| BBAR | BANCO BBVA ARGENTINA SA (ADR) | 92% | $18.80 | $4,671 | 11.6 | 96.9% | 0.0% | 80 | 0.0% |
| USLM | UNITED STATES LIME & MINERALS INC | 92% | $95.83 | $2,743 | 25.3 | 38.0% | 0.2% | 66 | -0.1% |
| TXRH | TEXAS ROADHOUSE INC | 92% | $170.04 | $11,299 | 26.3 | 47.6% | 1.4% | 80 | 2.5% |
| COIN | COINBASE GLOBAL INC | 92% | $189.75 | $48,174 | 19.9 | 39.3% | 0.0% | 66 | -12.6% |
| AGM | FEDERAL AGRICULTURAL MORTGAGE CORP | 92% | $194.80 | $2,049 | 11.9 | 16.6% | 2.9% | N/A | 2.5% |
| HLNE | HAMILTON LANE INC | 92% | $150.57 | $10,786 | 27.7 | 20.1% | 1.3% | N/A | -6.7% |
| CPRT | COPART INC | 92% | $53.88 | $52,053 | 36.2 | 17.9% | 0.0% | 66 | -0.6% |
| PHM | PULTEGROUP INC | 85% | $105.12 | $21,191 | 7.1 | 26.2% | 1.0% | 66 | 9.1% |
| RJF | RAYMOND JAMES FINANCIAL INC | 85% | $146.42 | $30,003 | 14.3 | 20.2% | 1.2% | 66 | 1.4% |
Key Takeaways
✅ Zweig’s model focuses on real growth—sustained by rising sales and healthy balance sheets, not financial engineering.
✅ Valuation discipline keeps investors from overpaying for even the fastest-growing companies.
✅ Consistent earnings growth and momentum are critical for maintaining high performance over time.
✅ Conservative debt limits and insider confidence provide additional safety measures.
For investors who want to pursue growth but with an added layer of risk management, Zweig’s Growth Investor Model offers a compelling, time-tested approach.
Want to learn more about how the Zweig Growth Investor Model works? Check out Validea’s YouTube channel for a full video breakdown of the strategy:
