Slack Investor is a simple man and he likes things that are not too complicated. He introduced the Slack Factor 9 months ago – a way to condense a lot of information down to just one number. The things that Slack Investor likes go on the top line and the things that he doesn’t like to be a high value – go on the bottom line.
Return on Equity (ROE) is a great measure of how profitable a company is and Earnings per Share Growth (EPSG) is a measure of growth – both of these are desirable company traits for Slack Investor.
Price/Earnings (PE) Ratio is a way of looking at how expensive a share is according to its earnings. This is a ratio that Slack Investor likes to be below 40 or 50 (ideally even lower!) when forecast for the next 2 to 3 years.
The Slack Factor has flaws
Evidence of this is the relatively poor performance of the Slack Fund in the last 6 months compared to benchmarks. The problem with the Slack Factor is that it gives prominence to a stock’s growth forecast. Slack Investor has found that many high Slack Factor stocks are found in the medical innovation sector where there are also very high risks – and if growth forecasts are not met, this can cause a massive slide in share price.
For example, back in August 2025, Telix Pharmaceuticals (TLX) had a very high Slack Factor. Slack Investor had thought that by limiting the 3-yr growth forecast to 30 might protect him from any outlandish growth forecasts. The raw figures for TLX EPS growth for the next 3-yr were 26%(+1yr), 97%(+2yr) and 92%(+3yr). On this high growth prediction, he bought a decent parcel of this stock back in March 2025 – based upon its high Slack Factor.
Suffice to say, it has not gone well.
The Slack Investor has flaws … just ask my wife!
Slack Investor recognizes his imperfections, but he always looks for ways that he can improve. To avoid being pushed into stocks that have extremely high growth forecasts that may fail to materialise, he has decided to take growth out of the Slack sorting equation … but putting the important growth property into the pre-requisites before he will invest.
The Slack investor pre-requisites or, ‘things he likes’ before investing are mostly found on the Market Screener Financials page:
- Profit – An established record of profit or a trend towards profit in the next year or so
- Increasing Revenue – An established record of increasing revenue and forecast revenue
- High Return on Equity – A forecast ROE of greater than 15%
- Maneagable debt – Slack Investor loves companies that fund their own expansion but debt is sometimes necessary to grow
- Growth – A forecast Earnings per Share Growth (EPSG) of greater than 10%
- Price Maker – Ideally the company will have a unique product or it is ‘best in class’ – a business with a ‘moat’
Introducing the Slack Ratio
This is just a simplification of the Slack Factor (without the EPS growth). Slack Investor likes a high Return on Equity (ROE). A high growth company may also have a high PE ratio because the price will rise to account for future earnings growth. By expressing these two factors as a ratio – hopefully profitable companies that are not too expensive will shine. If the Slack Ratio is above 0.7 – Slack Investor is more likely to buy.
Slack Investor has tabled the shares in the Slack Portfolio (in Bold type) and a grab bag of other stocks plus a few new ideas from Livewire growth stocks. I have sorted the table by decreasing Slack Ratio.
Over the next six months, Slack Investor will have a minor tinker with the Slack Portfolio. He will be more likely to buy a company that is higher on the list. If there are insufficient funds for a purchase, he will probably sell a company that is lower on the list. This is not advice, just an insight into Slack Investor’s financial journey.