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John Neff, one of the most respected value investors in history, achieved remarkable success over three decades managing the Vanguard Windsor Fund. Known for his disciplined contrarian approach, Neff focused on low P/E stocks, total return strategies, and opportunities in out-of-favor sectors. His leadership propelled Windsor Fund returns to consistently outperform the S&P 500, cementing his reputation as the "professional's professional."
Under John's leadership, a $1,000 investment in the Windsor Fund in 1964 would have grown to over $56,000 by his retirement in 1995, vastly outperforming the $23,000 return of the S&P 500 during the same period. His contrarian style emphasized finding undervalued, overlooked stocks that were "misunderstood, forgotten, or out of favor." He was willing to concentrate investments in high-conviction ideas, eschewing the diversification of every sector to avoid mediocrity.
Diagnosed with Alzheimer's late in life, Neff passed away in 2019, leaving behind a legacy as one of the most disciplined and impactful value investors in history.
John Neff's Stock Picking Criteria
His disciplined approach to stock picking revolved around identifying undervalued opportunities with strong potential for growth and income. His key stock picking criteria included:
Low P/E
Target stocks with P/E ratios significantly below the market average, offering both safety and upside potential.
Dividend-Adjusted PEG Ratio
Dividend-Adjusted PEG = P/E Ratio / (Earnings Growth Rate + Dividend Yield)
Focus on stocks with a ratio of 0.75 or lower to combine value and growth.
EPS and Sales Growth
EPS growth: 7% to 20% (achievable, not speculative).
Sales growth (5 years): 7% to 20%, ensuring consistent performance.
Positive FCF
Ensure the company generates positive FCF over the past 12 months and fiscal year.
Strong Operating Margins
Operating margins should be higher than the industry median or at least 10%, indicating profitability.
Total Return Potential
Combine earnings growth and dividend yield for a strong total return measure.
Example: A stock with 8% growth and a 4% yield offers a 12% total return.
6 US companies that John Neff would take a look
Applying John Neff's screen criteria in the US, I found 6 companies that John might like.
To find them, I used the following criteria using Finchat:
Diluted EPS 5Y CAGR = 7% - 20% (Although John does not specify if the growth is only one year, I decided to use 5 years to be in line with the sales growth over 5 years)
Revenue 5Y CAGR = 7% - 20%
P/E= < 18x (I use less than 18x because the average PE ratio in the market is ~17x).
Operating Margin > 10% (In this case, we cannot know that the operating margin is higher than the industry average, so I use 10% as a base which indicates high-quality companies.)
PEG Ratio = < 0.75
Dividend Yield = > 2% (Finchat does not allow to adjust the PEG as requested by Neff, so I use both criteria separately).
Unlevered FCF = $0 (as this indicates that it must be positive).
1. W. R. Berkley Corporation (WRB)
WRB is an insurance holding company that operates primarily in the US and internationally. It operates through two main segments:
Insurance: This segment underwrites commercial insurance, including premises operations, commercial automobile, property, products liability, and general and professional liability lines. It also offers workers' compensation, accident and health insurance, specialty environmental products, and more.
Reinsurance & Monoline Excess: This segment provides reinsurance services to other insurance companies and self-insured entities, helping them manage their net risk.
2. Ovintiv Inc. (OVV)
OVV engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids. The company's principal assets include Permian in west Texas and Anadarko in west-central Oklahoma; and Montney in northeast British Columbia and northwest Alberta. Its other upstream assets comprise Bakken in North Dakota, and Uinta in central Utah; and Horn River in northeast British Columbia, and Wheatland in southern Alberta.
3. Noble Corporation (NE)
NE operates as an offshore drilling contractor for the oil & gas industry worldwide. The company provides contract drilling services to the oil and gas industry through its fleet of mobile offshore drilling units.
4. Virtus Investment Partners, Inc. (VRTS)
VRTS is a publicly owned investment management firm that primarily serves individual and institutional clients. It provides investment management services, launching separate client-focused equity and fixed income portfolios. It also offers equity, fixed income, and balanced mutual funds, and invests in public equity, fixed income, real estate markets, and ETFs.
5. Sabine Royalty Trust (SBR)
SBR holds royalty and mineral interests in various producing oil and gas properties in the US. The company's royalty and mineral interests include landowner's royalties, overriding royalty interests, minerals, production payments, and other similar non-participatory interest in certain producing and proved undeveloped oil and gas properties located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas.
6. Permian Basin Royalty Trust (PBT)
PBT holds overriding royalty interests in various oil and gas properties in the US. The company owns a 75% net overriding royalty interest in the Waddell Ranch properties comprising Dune, Sand Hills (Judkins), Sand Hills (McKnight), Sand Hills (Tubb), University-Waddell (Devonian), and Waddell fields located in Crane County, Texas. It also holds a 95% net overriding royalty in the Texas Royalty properties, which consist of various producing oil fields, such as Yates, Wasson, Sand Hills, East Texas, Kelly-Snyder, Panhandle Regular, N. Cowden, Todd, Keystone, Kermit, McElroy, Howard-Glasscock, Seminole, and others located in 33 counties in Texas. Its Texas Royalty properties comprise approximately 125 separate royalty interests containing approximately 51,000 net producing acres.
Sources
James R. Hagerty, "John Neff Outperformed the Stock Market for Three Decades," The Wall Street Journal, June 13, 2019. Available at: https://www.wsj.com/articles/john-neff-outperformed-the-stock-market-for-three-decades-11560453159
Wayne A. Thorp,"John Neff’s Approach to Contrarian Investing," AAII Journal. May 2025. Available at: https://www.aaii.com/journal/article/john-neff-s-approach-to-contrarian-investing
Glen Arnold. The Great Investors. Financial Times, 2010 (BUY HERE with my affiliate link).
John Neff. John Neff on Investing. Wiley, 2010. (BUY HERE with my affiliate link).
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Not necessarily, The Windsor Fund, though popular in its time probably saw withdrawals at times due to vagaries in the market or from shareholders needing to sell. Therefore they would have had to possibly sell and reallocate or rebalance the portfolio.
John Neff was strictly a low P/E investor. He owned a fair amount of financial stocks in the Windsor Funds. Citicorp was a big success for him.
Another advantage if John Neff is that the fund has infinite capital to average down during the mispricing.
Retailer will be panicking selling and register a loss.