Stock-picking strategy: $6 billion fund manager shares 4-part criteria - Business Insider

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Richard Lawrence manages $6 billion and only buys 1 out of every 100 stocks he looks at. He details his simple 4-part recipe for sniffing out the market's next big winner.

"He ran a small family office out of Rockefeller center — and dad was a stock-picker," he said on the "He continued: "But the thing I remember from dad was just his love of getting to learn something new every day. That's what thrilled him, and that's what piqued my interest."

"We see about 400 companies a year," he said. "We do really serious analysis on 30 to 40 companies, and we aim to buy 3 or 4 companies." At any given time, Lawrence generally only holds 20-22 positions in the market with 60% of his capital allocated in his top ten picks. Since he only owns a handful of companies, he looks to avoid correlated risks.1. Invest in superior businesses

Lawrence starts his analysis by viewing the long-term track record of management. More specifically, he's looking to see how management behaved in downturns and unfavorable market environments. In doing so, he can better understand how management will react to hiccups in the future."And then thirdly, I believe in bargain valuations," he said. "We want to buy stocks with P/Es [price-to-earnings] half the growth rate and half the return on equity.

 

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