Top Manager Looks for Graham-Like Stocks

John D. Spears’ Tweedy Browne Global Value fund is in the top 1% of funds in its class based on 15-year returns, according to Morningstar, and Barron’s recently offered a look into just how Spears manages this top-performing fund.

According to Barron’s, Spears and his partners at Tweedy Browne “try to find what [Benjamin] Graham called ‘intrinsic value,’ by determining a company’s acquisition value, or by estimating the collateral value of its assets and/or cash flow.” Spears, Barron’s says, uses such metrics as low price-to-book ratios, low price-to-earnings ratios, low price-to-cash-flow ratios, and above-average dividend yields in analyzing stocks. He also says stock buybacks can be a bullish indicator, if the buybacks occur below intrinsic value levels. Other factors Spears and Tweedy Browne look for, according to Barron’s: insider buying, low debt, a low price-to-sales ratio vs. other companies in the same industry, and a stock price that is down significantly from previous highs. And they consider the prices involved in actual mergers, buyouts and liquidations.

To read the full article, which includes some of Spears’ fund’s recent holdings, click here.

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