How To Invest With Veteran Vanguard Portfolio Manager John Neff’s Contrarian Screening Strategy

In this article I cover the strategy that focuses on firms following the Neff strategy. Inspired by John Neff, who served as portfolio manager of the Vanguard Windsor Fund from 1964 until his retirement in 1995, the Neff value investing approach uses a stringent contrarian viewpoint. Neff perennially found undervalued, out-of-favor stocks in the bargain basement. He liked stocks with a combination of low price-earnings (P/E) ratios, solid forecasts in earnings and sales growth, along with an increasing dividend yield. Neff searched for stocks that were unattractive and, in his words, matched the fund’s “cheapo” profile. Neff’s book, entitled John Neff on Investing (Wiley, 2001), discusses these value investing principles. His book served as the primary source for this stock screening article.

The AAII Neff screening model has shown strong long-term performance, with an average annual price gain since 1998 of 13.7%, versus a 6.0% price gain for the S&P 500 index over the same period.