Street Stories

Dr. Martin Zweig

Market Wizards Index: +25%
Compound annual over 19 years

Fund or affiliation

Methodology

Propreitary and rigorous quantitative approach to measuring risk profile of markets and tries to time the markets by varying his combination of gross short or long exposures.

Research Techniques Employed

If you can think of a possible relationship between any economic, fiscal, demographic, or even whimsical indicator and the stock market, Zweig almost certainly has run the correlation. He builds up a large database of these indicators which tells him how much of risk there is in the market at any given time.
The indicators that test best get the most weight in his models. Part of the process is to keep up with the changes in economy and markets and come up with better measurements.
He uses monetary aggregates like prime rates, and sentiment/ market related indicators like mutual fund cash level, ads in Barron’s, and bear indicators like market P/E or yield curve.

Trading/ Valuation Techniques Employed

Aims to focus on how much he can lose at any time. Not how much he can make. "If you can protect your capital in bear markets you don’t have to be a hero in bull markets. You just have to be there."
Zweig is not trying to call tops and bottoms. He’s trying to get with the trends, and cut losses short.
He always have shorts (from 10-30%) in the private partnership. Even their mutual funds frequently short stock index future to hedge. This way, they don't have to sell the stocks.
If you’re stock picker and get 60% right, you’re good. You can even be less than 50% accurate and still beat the market as long as you eliminate the losses quickly and let the good ones ride.

Philosophy and beliefs

Risk adverse... I was a big poker player in college, and hated losing... I don’t care if I win or lose. It was the money.
‘The Things which hurt Instruct’ Benjamin Franklin. Make sure you don't make the same mistake twice.
"I cannot hold stocks through a bear market even in the greatest company in the world. The pain would kill me."
Sometimes the market goes mad. The only way to get an edge is to have people go wrong.

History and other facts

1961 was fresman year at Wharton.
Zweig is similar in style to Ned Davis, for whom he has nothing but praise.
Zweig recommended reading Reminiscences of a Stock Operator, 1923. Point 1: There is nothing new on Wall Street. Point 2: Don't fight the tape.

Performance Record

25% over 19 years: Zweig Performance Ratings Category 1 stocks from May 1976 to March 1995, achieved a return of 6,793%.
Zweig achieved the return with less volatility than the market. His portfolio climbed 9% on Black Monday, 1987.