Famous Investor Strategies
Quantitative strategies from legendary investors — with specific thresholds you can backtest directly.
Warren Buffett — Quality at a Fair Price
Buy wonderful companies at fair prices. Focus on durable competitive advantages (moats), consistent earnings, and shareholder-friendly management.
| Metric | Threshold |
|---|---|
| ROE (5yr avg) | > 15% |
| ROIC | > 15% |
| Debt/Equity | < 0.5 |
| Net Profit Margin | > 10% |
| Operating Margin | > 15% |
| Free Cash Flow | Positive and growing |
| Earnings Growth | Consistent > 10% YoY |
| P/E Ratio | Below industry avg or < 15 |
| Quality of Earnings | Operating cash flow > Net Income |
Buy AAPL when ROE > 15% and debt-to-equity < 0.5 and P/E < 15 and operating margin > 15%Benjamin Graham — Deep Value
Buy stocks trading significantly below intrinsic value. The "margin of safety" protects against errors in analysis.
| Metric | Threshold |
|---|---|
| P/E Ratio | < 15 |
| P/B Ratio | < 1.5 |
| P/E × P/B | < 22.5 (Graham Number) |
| Current Ratio | > 2.0 |
| Debt/Equity | < 1.0 |
| Earnings Growth | Positive EPS last 10 years |
| Dividend | Uninterrupted 20+ years |
Buy INTC and MU when P/E < 15 and P/B < 1.5 and current ratio > 2 and debt-to-equity < 1Peter Lynch — GARP
Find growth stocks reasonably priced relative to their growth rate. The PEG ratio is the key metric.
| Metric | Threshold |
|---|---|
| PEG Ratio | < 1.0 (ideally < 0.5) |
| Earnings Growth | 15-30% annually |
| Debt/Equity | < 0.33 |
| P/E Ratio | < Earnings Growth Rate |
| Free Cash Flow | Positive |
Buy MSFT when earnings growth > 15% and P/E < earnings growth rate and debt-to-equity < 0.33William O'Neil — CAN SLIM
Combine fundamental strength with technical momentum. Buy leading stocks breaking out of proper bases.
| Letter | Metric | Threshold |
|---|---|---|
| C | Current quarterly EPS | Up ≥ 25% YoY |
| A | Annual earnings growth | Up ≥ 25% for 3-5 years |
| N | New product/high/management | Near 52-week high |
| S | Supply & demand | Low float, volume surge |
| L | Leader or laggard | RS Rating ≥ 80 |
| I | Institutional sponsorship | Increasing ownership |
| M | Market direction | Uptrend confirmed |
Buy NVDA when EPS growth > 25% and price is within 5% of 52-week high and volume is 1.5x above averageAltman Z-Score — Bankruptcy Prediction
A formula that predicts bankruptcy risk. Use it as a quality filter to avoid distressed companies.
| Z-Score | Zone | Meaning |
|---|---|---|
| > 2.99 | Safe | Low bankruptcy risk |
| 1.81 - 2.99 | Grey | Moderate risk |
| < 1.81 | Distress | High bankruptcy risk — avoid |
Only buy F when the Altman Z-Score is above 3 and P/E < 20Ray Dalio — All Weather / Risk Parity
Balance risk across economic environments rather than concentrating in equities.
| Environment | Indicators | Favored Assets |
|---|---|---|
| Growth Rising | GDP accelerating, PMI > 50 | Stocks, Commodities |
| Growth Falling | GDP decelerating, unemployment rising | Long-term Treasuries, TIPS |
| Inflation Rising | CPI accelerating | Commodities, TIPS, Gold |
| Inflation Falling | CPI decelerating | Stocks, Long-term Treasuries |
Buy VTI when GDP growth is positive and unemployment is falling. Sell all and buy TLT when unemployment is rising.David Dreman — Contrarian Value
Buy out-of-favor stocks with strong fundamentals. Market overreacts to bad news. Hold 2-3 years for mean reversion.
| Metric | Threshold |
|---|---|
| P/E Ratio | Bottom 20% of market |
| P/B Ratio | Bottom 20% of market |
| Dividend Yield | Top 20% of market |
| Payout Ratio | < 50% |
| Debt/Equity | < industry average |
Buy VZ and PFE when P/E < 12 and dividend yield > 3% and payout ratio < 50%Martin Zweig — Growth + Momentum
Earnings acceleration is the #1 signal. Revenue must confirm earnings (both growing).
| Metric | Threshold |
|---|---|
| Revenue Growth | Accelerating (this Q > last Q) |
| EPS Growth | ≥ 15% and accelerating |
| P/E Ratio | < 3× growth rate, not > 43 |
| Debt/Equity | < industry median |
Buy GOOGL when EPS growth > 15% and revenue growth is accelerating and P/E < 40John Neff — Low P/E Contrarian
Buy unfashionable stocks with low P/E ratios, decent growth, and high dividend yields.
Formula: Total Return Ratio = (Earnings Growth + Dividend Yield) / P/E Ratio. Buy when > 2.
| Metric | Threshold |
|---|---|
| P/E Ratio | Below market average |
| Earnings Growth | 7-20% |
| Dividend Yield | > 0% |
| Revenue Growth | Positive |
Buy JNJ when P/E < 18 and earnings growth is between 7-20% and dividend yield > 2%Philip Fisher — Growth Quality
Buy outstanding companies with superior management and hold for the very long term.
| Metric | Threshold |
|---|---|
| Revenue Growth | > 10% annually for 5+ years |
| Net Margin | Improving trend |
| Operating Margin | > 15% |
| ROE | > 15% |
| Debt/Equity | < 0.35 |
| EPS Growth | > 15% sustained |
Buy AMZN when revenue growth > 10% and ROE > 15% and operating margin > 15% and debt-to-equity < 0.35John Templeton — Maximum Pessimism
Buy at the point of maximum pessimism. Look for extremely cheap stocks with intact fundamentals. Hold 4-5 years.
| Metric | Threshold |
|---|---|
| P/E Ratio | < 5 (extreme value) |
| P/B Ratio | < 1.0 |
| Price vs 52-week high | Down > 50% |
| Earnings | Still positive |
| Debt/Equity | < 1.0 |
Buy INTC and PARA when P/E < 8 and P/B < 1 and price is down 50% from its 52-week high and net income is positivePat Dorsey — Economic Moat Investing
Identify companies with sustainable competitive advantages and buy them at reasonable prices.
| Moat Signal | Metric | Threshold |
|---|---|---|
| Pricing Power | Gross Margin | > 40% stable for 10yr |
| Efficiency | ROIC | > 15% for 10yr |
| Scale | Operating Margin | > industry, expanding |
| Capital Light | Capex/Revenue | < 5% |
| Cash Generation | FCF Conversion | > 80% of earnings |
Buy AAPL when gross margin > 40% and ROIC > 15% and capex-to-revenue < 5% and P/E < 20