Growth and Value †Two Sides of the Same Coin - 1056 Words

- â€Å"The central principle of investment is to go contrary to the general opinion on the grounds that if everyone agreed about its merit, the investment is inevitably too dear, and therefore unattractive.† – John Maynard Keynes Many money managers feel they must distinguish themselves as either â€Å"growth† or â€Å"value† investors. While an apparently benign distinction, this simple act can have unintended consequences. This article will address conventional definitions of growth and value and then look to the market oracles for a dose of worldly wisdom. Value investing: The strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has†¦show more content†¦So, when is it appropriate to distinguish between growth and value? Another very famous investor, Peter Lynch, pioneered a hybrid of growth and value investing with what is now commonly referred to as a growth at a reasonable price (GARP) strategy. Here we see that the two approaches can be synthesized in the way Buffett describes. Successful growth investing, which more often than not will bring with it longer holding periods, requires two distinct elements: 1) The business must have a legitimate long-term competitive advantage. 2) The business most possess the ability to grow earnings on a long-term basis. Conversely, to be successful in the long term, it is incumbent upon the value investor to sell average companies (Like company B) when the market price approaches or exceeds fair value. All investors need to pay attention to the price they pay for equities. Companies that hold large competitive advantages and exhibit steady growth can be poor growth propositions if they are â€Å"priced to perfection† just as ‘value propositions’ must incorporate a significant disparity between price and discerned value. All investments: growth, value or other, should be bought with a Margin of Safety. Conclusion: The stock market may be likened to the field of horse racing. Most punters are focused on picking the best horse in the race. The error here is in assuming that the best horse comes with the best odds. QuiteShow MoreRelatedThe Growth Of A Country s Economy By David Hume And Adam Smith Essay1701 Words   |  7 Pagesevaluate the overall performance of a country’s economy, it has been widely examined and analyzed by economists throughout history. 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