2 most popular investment style ! Value Investing or Growth Investing

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One wrong investment can evaporate all your savings, and one right investment can grow you like anything ! 

Very nice saying " The stock market is filled with individuals who know the price of everything, but the  value of nothing. ~ Philip Arthur Fisher

When we talk about wealth creation it becomes necessary for us to understand what are the investment styles people have used in the past to create wealth.

 And the answer is-

There are broadly two most popular investment styles 'Value Investment' and 'Growth Investment'

 1) Value Investment style: Warren Buffet the master of Investment is majorly focused on value investing strategies. These strategies are for a long term basis and investment is done only those stocks which have just started performing good but price is not moving up or falling down.These stocks will be available at low Price to earning and their 'intrinsic value' will be higher than 'market price'. Companies may start performing well because of several reasons. It may be because of change in management, economic favours, change in business strategy or so on..

 To check the performance of the stock there are few important parameters.

a. Return on Equity (ROE): ROE is increasing from the last couple of years.

b. Sales: Is increasing from the last couple of years

c. EBIT margin: Is increasing from the last couple of years

d. Net Profit margin: Is increasing from the last couple of years.

e. EPS: Is Growing from the last couple of years.

f. Du-Pont Analysis.

 And the last but not least Return On Invested Capital must be greater than Cost of Capital. 

https://invst.ly/r72rk

 


 

Mar-19

Mar-20

EPS

18.92

22.00

ROE

19.97%

20.22%

PAT Margin

4.41%

4.72%

EBIT Margin

9.57%

9.17%

Net Sales Growth (%)

8.38%

8.30%

PE Ratio

20.60

13.62

ROIC

26.82%

28.53%

Cost Of Capital 

13.00%

13.00%

 

A perfect example of value investing.I personally earn 20% with the help of this strategy within 2 months.

 

  2) Growth Investment style: Motila Oswal CEO investment veteran Mr. Ram Deo Aggarwal is focused on this strategy. They have created wealth of 0 to 1000 cr simply because of  this strategy. As per this investment style I will prefer to invest  only consistently growing companies. Remember they have not started performing just in the last couple of years but they are consistently growing in their industry and performing well. P/E of these stocks will always be high. Their sales margin, EBIT margin, ROE margin etc. might be lower as compared to value investing companies however they are consistently growing.

 

This strategy works on the principle of Buy and Hold. Buy high Sell high. Hindustan Unilever (FMCG), Aarti industries ( chemicals) etc. are the examples of this strategy.

 

 

Investor Choices

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