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Value & Growth

The document discusses value investing versus growth investing. It defines value investing as buying underpriced stocks based on fundamental analysis and notes value investing has historically outperformed growth investing and the overall market. Growth investing is defined as investing in companies expected to grow earnings faster than peers. While value investing seeks margin of safety, growth investing takes on higher risk but promises high returns. Neither approach is conclusively better, so a blended strategy combining both value and growth is recommended for long-term investors.

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Namit Gupta
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174 views

Value & Growth

The document discusses value investing versus growth investing. It defines value investing as buying underpriced stocks based on fundamental analysis and notes value investing has historically outperformed growth investing and the overall market. Growth investing is defined as investing in companies expected to grow earnings faster than peers. While value investing seeks margin of safety, growth investing takes on higher risk but promises high returns. Neither approach is conclusively better, so a blended strategy combining both value and growth is recommended for long-term investors.

Uploaded by

Namit Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Value vs Growth Investing

Presented by:

Aman Agrawal 20020241011

Namit Gupta 20020241057

Neema Sharma 20020241061

Raunak Ladha 20020241114

Utkarsh Kaushik 20020241102

Yash Rathore 20020241109

Prakhar Goyal 20020241076


Value Investing
What is Value Investing?
● Buying securities that appear underpriced by some form of fundamental analysis

● The early value opportunities identified by Graham and Dodd included stock in public companies
trading at discounts to book value or tangible book value, those with high dividend yields, and
those having low price-to-earning multiples, or low price-to-book ratios

● Essence of value investing is buying stocks at less than their intrinsic value.

● Value investors actively ferret out stocks they think the stock market is underestimating.

● Value investors use financial analysis, don't follow the herd, and are long-term investors of
quality companies.

Value Investing Performance


● Value investing has proven to be a successful investment strategy

● Numerous academics have published studies investigating the effects of buying value stocks

● These studies have consistently found that value stocks outperform growth stocks and the
market as a whole as per historical data.
Characteristics of Value Investing

01 Lower Price than Sector

02 Priced by Current Fundamentals

03 Lower Risk

04 Margin of Safety
Value Investment Process

Stock Investment Monitoring


Selection

● Financial Analysis ● Staggered ● Quarterly Report

● Valuation ● Distributed ● Annual Report


across Sectors
● Risk Analysis ● Course
Correction
Value Investing : Pros and Cons
Pros Cons
● Reduces probability of a large loss ● Cheap shares (trading at less than
by purchasing equities with a higher intrinsic value) can get cheaper and
margin of safety. cheaper in downward trend and vice-
versa.
● Against the herd whereby hot tips
and fad do not impair the investor ● Intrinsic Value is subjective ,part art
judgement. and part science. Two analyst can
analyze the same company and
● Provides consistent returns which derive a different intrinsic value.
regularly outperform the S&P over
a twenty year period. ● Returns may be lower than growth
investing on an annualized basis.
Growth
Investing
What is Growth Investing?
• It is an approach in which the investors expect the particular growth companies to grow at a
faster clip than others

• The investors expect continuous and strong growth in profit, revenues, book value, and cash
flows.

• Companies are fundamentally and financially sound and outpace competitors with innovative
product offerings and pricing strategy.

• Growth Investors typically invest in growth stocks- that is young or small Co. s whose earnings
are expected to increase at an above average rate compared to the industry sector or overall
market.
Characteristics of Growth Investing

01 High Earnings Growth

02 Higher Price-To-Earnings

03 Higher Volatility
Growth Investing : Pros and Cons
Pros Cons

● Large Capital Appreciation ● High Volatility

● Compounding of wealth ● Substantial Research


● Long Term Dominance
● Long Term

● Choosing the wrong


company
Growth Value
Typical stock characteristics: Typical stock characteristics:

▪ Emerging Companies ▪ Established companies that may be in


transition
▪ Usually don’t pay dividend
▪ More likely to pay dividends
▪ Higher Valuation
▪ Lower Valuation
▪ High expected short-term earnings
growth potential ▪ Stable expected long-term earnings
growth potential
Which Approach Is Better?
● Investing is individual-centric and is based on the investor’s risk appetite, financial goals, time
horizon.

● Although proponents of both these theories have their reasons for liking or disliking a particular
set of stocks, there is no ‘right’ or ‘wrong’ approach when it comes to selecting stocks.

● “In our opinion, the two approaches are joined at the hip: Growth is always a component in the
calculation of value, constituting a variable whose importance can range from negligible to
enormous and whose impact can be negative as well as positive.” – Warren Buffett

● Value investors are more cautious while growth investors are more optimistic.

● Value investors wants to have margin of safety while growth investors are more optimistic
towards future growth.
Economic Moat
The term “economic moat” refers to a long-term competitive advantage that a company holds that protects its
position in the marketplace. The term is inspired by the moat that surrounded medieval castles to protect the
valuables within from invaders. A company with a strong moat possesses a competitive advantage that is both
strong and sustainable.

Creating an Economic Moat


• Complexity of product
• Complexity
• Protection
• High switching costs
• Habit and horizontal differentiation
• Switching costs
• Network effect
• Brand value
A Blended Approach: Growth Investing + Value
Investing
● There’s no need to exclusively pursue a growth investing or value investing strategy. A
better way could be to take what’s referred to as a blended approach. A blended investing
strategy means you buy companies that fall into both value and growth categories. This
can be as easy as investing in an S&P 500 index fund.

● The returns you can get by pursuing a blended approach typically lag either a growth or
value strategy short term, depending on which is outperforming the other. As such, it can
be psychologically difficult to stick to a blended approach when more money is being
made either with growth or value investing

● Over the long-term, however, a blended approach can often outperform an investor who
switches between growth and value in an attempt to time the market.
Thank
You

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