Last week we explored the concept of value based investing – selecting securities trading lower than their intrinsic value. An equally popular investment style is growth based investing.
Investors searching for growth aka capital appreciation, would look for companies which are likely to grow their earnings at above average rates. A growing business is one that continues to increase what it sells to consumers, whether a product or a service or both, thereby increasing the revenue it generates every year.
There are many examples of growing companies including well-known names like Tesla, Apple, Facebook etc. Growth investors could also find relevant businesses in industries where general demand continues to increase i.e. cyber security, green energy, assisted living facilities etc.
While value & growth investing are some of the more popular investment styles, there are many others including, a hybrid of the two; GARP (Growth at a Reasonable Price); tactical investing (where lots of trading takes place in an effort to time the market); strategic investing (buy quality and hold for the long run); long/short investing via the use of derivatives etc.
There are many paths to success, but many variables can impact which approach will work best in a certain economic environment and trying to predict what the best investment style will be for an upcoming period is a very difficult to task.
A Calgary company which manages a portion of our growth allocation (and has managed a portion of my personal portfolio for a number of years) focuses on global companies with expectations for above average earnings growth. While the approach has yielded stellar long-term results, there’s a good chance that it won’t outperform the beaten up cyclical oil and gas sector over the upcoming year or so. While we’re taking advantage of the value that exists in the energy space, we are patient as we know that in the end, investors will also recognize and turn to companies experiencing strong earnings growth.
I’ve included a table which shows the variation in the results of some of the various investment styles and sectors dating back to 1997.
Hope you have a colour monitor.
Daniel Popescu CFP, CIM, FMA, FCSI
President & CEO
MNP Tower, 3100-1021 West Hastings St.
Vancouver, BC V6E 0C3
T: 604-558-6830/1(877) 588-6822
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