<\/span><\/h3>\n\n\n\nThis is an investment strategy which solely looks for companies that will grow massively and fast compared to other companies and the general market, henceforth the name growth investing. <\/p>\n\n\n\n
In this strategy, investors need to have the knowledge to understand the financials and to do valuations of a business, because growth investors mostly focuses in the possibility of the company to grow exponentially based on a company’s business operations, revenues, investments, innovations and industry.<\/p>\n\n\n\n
The Company <\/span>– It is finding the next big things like technological innovations and disruptive inventions. Such companies are considered growing because of the possible future earnings of a ground breaking technological advancements that could change everyone\u2019s lives in the long run. For instance, Electronic vehicles, blockchain technology, electronic commerce, space travel, AI technology and nanotechnology.<\/p>\n\n\n\nEarnings <\/span>– Investors base the growth in a company\u2019s earnings. Growth companies have in average, earnings of 20% or more year on year. That is why growth investors keep in tabs with the quarterly and yearly earnings to see if their forecasted estimated growth is near accurate or not.<\/p>\n\n\n\n<\/span>Advantage:<\/span><\/h4>\n\n\n\n\n- High return on our investments<\/li>\n\n\n\n
- Investors invest in new technologies that could improve human lives<\/li>\n\n\n\n
- We gain more knowledge about the companies and industries that are mostly related to disruptive new innovation technologies.<\/li>\n<\/ul>\n\n\n\n
<\/span>Disadvantage:<\/span><\/h4>\n\n\n\n\n- High Valuations – investors are willing to pay more than the main value of the company, even if the company is currently unprofitable. The reason behind, it is because they are investing for the possible future profitability and growth of the company. For instance, Tesla motors in the US, investors price this company at a market capitalization of 810 billion USD, while their current net income for the year 2020 is 690 million USD. It just signifies that Tesla Investors see the company to reach 810 billion in earnings, probably after a few years or a decade.<\/li>\n\n\n\n
- No dividends – yes, most growth companies do not pay dividends. This is because growth companies mostly reinvest all of the company\u2019s earning back to the company. This is to grow the company exponentially and to continue to reinvest it for innovations, technology and company expansion.<\/li>\n\n\n\n
- High volatility – price fluctuates a lot with growth stocks because of the fact that investors invest in it for the future. When problems with growth companies arise, like if they are not able to meet the investors quarterly or yearly expectations, then these factors could drive the stock price into a sharp or gradual decline. On the flipside, if the growth company has beaten the investors earnings expectations and\/or substantially improved like newer products and services, then this could significantly boost their stock market price.<\/li>\n\n\n\n
- We need to study, research and monitor the company\u2019s financials to make sure that the company is growing based on our own valuations. We also need the Knowledge about basic accounting, to understand what the financials of the company says.<\/li>\n<\/ul>\n\n\n\n
<\/div>\n\n\n\n
<\/span>Value Investing<\/span><\/h2>\n\n\n\n
![\"\"](\"https:\/\/i0.wp.com\/elmads.com\/wp-content\/uploads\/2021\/06\/3.png?resize=750%2C629&ssl=1\")
<\/figure>\n<\/div>\n\n\n<\/span>Money Massively Grows with Mispriced, Strong and Fundamentally Sound Companies<\/span><\/h3>\n\n\n\nIt is finding companies that are trading below their actual value. Investors that utilize this strategy can also be called bargain hunters. Value investing is finding the diamond in the rough, they grab the opportunity for prices that are lower than it should be and waiting for it to appreciate once the market sees its true value.<\/p>\n\n\n\n
Value investors focus most of their time on the underlying business of the company, because that is where they find its fair price depending on their historical, current and future predicted financials.<\/p>\n\n\n\n
They utilize 4 simple and summarized steps, which are the following<\/p>\n\n\n\n
\n- Company should have good management (debt managing, liquidity and capital allocation)<\/li>\n\n\n\n
- Long-term sustainability (Will the company still be operating for more than a decade and will they have a durable competitive advantage?)<\/li>\n\n\n\n
- Good operations and growth (is the company growing, stagnating, declining or will bounce back from decline?) <\/li>\n\n\n\n
- And buy below intrinsic value (we do not pay more than the computed value of the company, which depends on our own valuations)<\/li>\n<\/ul>\n\n\n\n
They see the shares of a company not for as stock prices but as a real part ownership of a corporation. This is why it is called value, they look for the essence and underlying value of the company. They invest in unpopular companies that most investors sell or do not buy because of certain headwinds, but does not have any significant impact into the financial standings and business of the company. Typical bargain hunters.<\/p>\n\n\n\n
Value investing also practices buy-and-hold strategy because these investors, just like what I have said, see stocks as an ownership of a company. As like what Charlie Munger quoted;<\/p>\n\n\n\n\u201cYou shouldn\u2019t be buying stocks that you might need to sell in the first place.\u201d<\/p>Charlie munger<\/cite><\/blockquote><\/figure>\n\n\n\n<\/span>Advantage:<\/span><\/h4>\n\n\n\n\n- Strong investment returns<\/li>\n\n\n\n
- We gain more knowledge about the companies and industries<\/li>\n\n\n\n
- Practices Patience<\/li>\n\n\n\n
- Leverages on stock price volatility <\/li>\n\n\n\n
- Dividends – most undervalued companies have high dividend yields due to its low stock price. (this is only a feature and not the main focus of value investing)<\/li>\n<\/ul>\n\n\n\n
![\"\"](\"https:\/\/i0.wp.com\/elmads.com\/wp-content\/uploads\/2021\/07\/Popular-Investing-Strategies.png?resize=574%2C481&ssl=1\")
<\/figure>\n<\/div>\n\n\n