Growth Vs Value Investing: Two Approaches To Stock Investing

Growth and Value investing are the two major ways investors approach stock investing. While some make use of one of them, others use both, and when two methods are aimed at achieving the same goal, debates and comparisons are bound to arise. 

Growth investing or value investing; is one better than the other? Can you use them both? Are there disadvantages to one that the other one complements? 

These questions have bugged investors for a long time. Many have conjured convincing arguments for and against both approaches, but the battle still rages on. They deserve answers. 

But first, just so that the bases are all covered, what is growth investing, similarly, what is value investing?

 

What Is Growth Investing?

Growth investing is a strategy in which investors recognize growth companies that are outperforming their peers in revenues, cash flows, profit, and book value. 

They grow at rates that their peers struggle to keep up with. There is also an expectation that these companies would keep up with their massive yield returns for a while. When you look close enough, you will find growth companies everywhere in small, medium, and large-sectors. 

Growth companies may be relatively new and without a long history of earnings, but what marks them out as growth companies is that they have been doing well in the past few years, are doing very well at the moment, and look as if their momentum would carry them further. 

These prospects attract investors to them.

 

Pros and Cons of Growth Investing

Pros

  • Growth companies have a tendency to multiply their returns quickly. They are often ahead of their peers in yields and look as though they can keep it up for a few more years.
  • Growth companies are also recognized for their ability to stay afloat during unfavorable economic climates. Even when growth companies have it bad in those times, the growth of their stocks just slows down. And when it gets even worse, they may experience a little dip in their stock values. But generally, they still look as though they are having it better than other companies.

Cons

  • The rate of growth these companies experience exposes their stocks to more volatility, which is something many investors like to avoid. Their stocks are extremely active and often experience wide price swings. This high volatility piles up the risk level of investing in growth companies.
  • The stocks of growth companies are usually more expensive than other stocks in the market. So, investors have to be very certain that the company is worth the heavy investment they intend to place on it.
  • Many growth companies don’t pay dividends to their shareholders. Instead, they reinvest the money into pushing their growth higher. So if you are looking to be a growth investor, do not expect an income from the companies.

 

Value Investing 

Value investing is the approach to investing that focuses on companies whose stocks are currently priced below their actual value. Value investors see these stocks as being undervalued at the moment but that they are strong enough to regrow into their actual values, or even more, given time. 

These companies usually already have a robust financial foundation with a remarkable history of success. So when they become undervalued for any reason, investors see their drop in value as the perfect time to buy their stocks and wait for them to grow.

The reasons for the dips in value stocks could vary from public perception to setbacks in operations. But ultimately, value investors do not believe that these setbacks are strong enough to halt the growth of the companies in the long run.

 

Pros and Cons of Value Investing

Pros

  • Good deals abound in value investing. Remember that value investing is all about buying undervalued and underpriced stocks. In other words, you are buying their stocks when they are selling at a discount. If this isn’t a good deal, what is?
  • Value investing is not as bared to risk as growth investing is because there is a low level of volatility. Usually, value companies are regarded as boring companies, so there aren’t usually many things that upset their prices.
  • Value stocks may not yield you a huge return is a short time, but they can earn you consistent profit over time.

Cons

  • Value investing avoids big risks. However, the advantage of big risk investments is that they often have massive returns. So if you stuck with value investing, you could lose out of riding on the wings of volatility and risk to gain massive returns.
  • Value investing takes a lot of time before you reap bountiful rewards, and that is assuming it is eventually profitable. It is also energy-consuming, as you would have to do a crazy lot of research to be sure that the value stock was worth investing in.
  • Telling which stocks are only being temporarily underpriced apart from stocks that are actually grinding to a halt could be very tricky. Even if you could tell which one was only experiencing a temporary dip, the stock may end up not yielding the returns you had expected.

 

Primary Differences between Value Investing and Growth Investing 

If you’ve been following this article from the beginning, you might already be able to spot differences between these two approaches to investing. 

However, there may be some you would have omitted or that aren’t immediately obvious to you. So how is value investing different from growth investing?

Growth investors are always on the lookout for companies that have consistently grown their profits and revenues for some years. 

They always have their eyes on companies that make products that are exciting and in vogue but also ensure to know that these products would not run out of favor of the public before they make their profit. 

Perfect examples of growth companies are Facebook, Google, Amazon, and Netflix. These companies rode on the growth of digital trends, which is still ongoing. 

Value investors, on the other hand, have their eyes set on companies whose values fall below what they should be. Value investing deals with a lot of research as investors always want to be certain that the value company is only experiencing a dip. 

Otherwise, they might end up pouring their money on a dying company. Coca Cola falls into the category of a value company. It has been around for a long time and has been consistently profitable. 

While they might not yield as much as Amazon given the same period, Coca Cola has proven that it is stable enough to pull through challenges and still come out yielding profits.

It is possible for a company to take on any of these two forms during its life. After all, some value companies of today used to be growth companies a long time ago.

 

Growth Investing or Value Investing: Which is Better?

The better one between growth and value investing is one that you feel more comfortable doing. These are the common things that influence one’s approach to investing. This debate is almost like one that investors have when it comes to choosing between dividend stocks and bonds based on risk-adjusted returns. 

 

Risk Appetite

This debate is almost like one that investors have when it comes to choosing between dividend stocks and bonds based on risk-adjusted returns. 

While stock investing basically involves risk, some investors still have more risk appetite than others. And value investors often fall on the low-risk appetite side of the court. 

This is because value investing involves a lot of research that leaves less room for risk and guesswork. They arm themselves with many years’ worth of financial documents of the company they intend to invest in. 

They then burrow into these documents to see if the company is worth their investment. Growth investors, who usually have larger risk appetites, don’t do as much research. 

They recognize a growing trend and the companies that are at the heart of these trends, and they invest. This is not to say, however, that growth investing is entirely guesswork. It consumes its own healthy dose of research as well.

 

Time

Growth companies always tend to yield returns quickly, but many of them just as quickly run out of momentum and lose most of their value. 

Profitable value companies may not return massive yields in a few years, but they guarantee a steady increase in profits over many years.

 

Growth and Value Investing: Using One to Complement the Other

We could sit here and keep going on about how one is better than the other. But one thing that is sure is that these two approaches to investing can complement each other. 

In fact, it is good to diversify your portfolio with representatives from both approaches. This way, the advantages of one can make up for the disadvantages of the other. 

For instance, if you want to quickly build up your portfolio, include some growth assets. And if you want to have a stable, less volatile asset to offset the risk of your growth assets, you may include some value assets to your portfolio. You really do not have to stick to one approach.

 

Conclusion

The debate about which is better between growth and value investing may not be needed. Especially when you could use both to maximize your profits and cut down your risks. 

When you are looking to invest, make sure you do your research, irrespective of whether you are buying growth stocks or value stocks.

Theories of Change are becoming popular!

Initially the Aspen Institute coined the term “Theory of Change”. The term got picked up by some impact investors like Charly Kleissner and the GIIN (Global Impact Investing Network).

The GIIN defines as follows „A theory of change (also referred to as the Theory of Value Creation or Logic Model) is an expression of the sequence of cause-and-effect actions or occurrences by which organizational and financial resources are hypothesized to be converted into the desired social and environmental results.“

„Wow“ That sounds complicated and broad. As a consequence we now live in a world with more than one „Theory of Change“ – we have a whole bunch of „Theories of Change“

So it is high time to systemize, categorize and improve – and it is necessary to show-case and evaluate the value of theories of change. I am proud to announce here that “Theories of Change” is a New Publication in my “Sustainable Finance Series with Springer Palgrave MacMillan (see https://www.palgrave.com/br/series/15807).

 

In the “Journal of Sustainable Finance & Investment” Edward T. Jackson has been interrogating the Theory of Change and asked a couple of relevant, future oriented questions and started to define the research agenda.

Now here we are to implement “Theories of Change” into practice.

In the new “Theories of Change” anthology (part of the sustainable finance series http://sustainable-finance.io

 

 We will concentrate on the following fundamental question:

 

> Imagine a world in which decision makers are enabled to anticipate the future impact of today’s decisions. .

> Imagine a world in which a simulation model consistently calculates future states of a system from the present state considering possible future interventions.

> Imagine the method and model includes perspectives of all actors along the value chain. Imagine how helpful this model shall be.

Therefore I am glad that Salomon Billeter will write on this topic for our “Theories of Change” Publication.

Find the poster here.  Enjoy!

 

Courtesy of https://scaling4good.com

Simulated Action Analysis for Sustainable Impact

 

 

 

 

Wann: 06. November 2018 ab 9:30, mit Abendveranstaltung ab 19:10h Wo? Gutshof Ladenburg Schriesheimer Straße 101 68526 Ladenburg


marktplatz

  1. Marketplace for sustainable investment

 

The 5th market place for sustainable investment is aligned by the Qualitates together with FNG, Ökofinanz 21, CRIC and Weltethos-Institut as partner. It is the meeting place for financial advisers, representatives of foundations and other institutional investors www.sustainable.investments .
   

 

The 5th marketplace for sustainable investments on 6 November 2018 in Ladenburg is under the motto “Change through sustainable investment”. Big and small investment houses will be able to imagine the investment opportunities they offer and the potential for change to a sustainable business practice with their investments. Approximately 30 houses present themselves here in a deliberately communicative framework. An evening event offers additional opportunity for exchange.

The topic of change through sustainable investing goes beyond the narrower discourse of impact investing. In addition to real-estate investments, where concrete impact descriptions are comparatively easy to understand, there are investments in the capital market, whose often broad distribution makes an impact description more complicated and which also invest in suppliers where sustainable effects are sometimes less graphic.

The event can now also be found at XING ( https://www.xing.com/events/5-marktplatz-nachhaltige-investments-1970669 ) and LinkedIn ( https://www.linkedin.com/showcase/marktplatz-nachhaltige- investments / ).

You can register here: www.nachhaltige.investments .

 

Media

Handelsblatt Business Briefing

Frankfurt Business Media: The Foundation and The New Financial Advisor

 

Cooperation partner / co-organizer

FNG – Forum Sustainable Investment

Ökofinanz-21 eV – Network for sustainable investment advice

CRIC eV – Association for the Promotion of Ethics and Sustainability in Investment

Welthethos Institute – Research and teaching institution at the University of Tübingen with the aim of promoting value orientation and trust in business, politics and society

 

Show highlights

By consultants for consultants and investors

Direct exchange with initiators

Networking

Personal atmosphere

evening programme

… just a real marketplace!

 

Will Banks As We Know Them Still Exist in 10 Years Time?

Join our Discussion Group on Facebbokhttps://www.facebook.com/search/top/?q=swissfintechladies

We are in the middle of a banking revolution that will transform financial institutions as we know them today. FintechLaides wer discussing at a SwissFinTechLadies event organized in cooperation with Microsoft, Switzerland and Eccos Impact GmbH Cham

Digital transformation for banks is a blessing and a challenge at the same time.
On one hand it might help to survive the pressures of low growth, waning profitability and tough regulation- if banks can adapt to this new reality quickly enough using fintech, ledger technology and big data analysis. At the same time new crypto-currencies are mushrooming all over the place. Transactions carried on blockchain-system do not need a third party (like a bank or a notary public) to confirm their existence or correctness.

At Microsoft we discussed a number of questions:
Can financial institutions again come closer to the customer?
What is our vision of money?
Crypto- or FIAT Money- or both?
What is the technological, financial and organizational capacity for self-transformation of investment, finance and banking?
How will banks be able to use fintech4good?
Will they engage in climate ledger technology?

After a thriving and intense discussion we had a good chat over a drink and are looking forward to the next event on September 18 in Zurich.

1
Key Note Speakers after the Panel Discussion at Microsoft
From left to right: @Isabella Grayson, @Fabiola Imhoff, @Edzard Paulussen, @Karen Wendt

 

The event at Microsoft was just the kick off for more discussions on the future of banking in the age of digitalization.
Join for the next event “Digital Competencies in the Swiss Finance Industry” – an event in cooperation between SIF (Schweizer Institut für Finanzausbildung) and Kalaidos university of applies science.
https://www.kalaidos-fh.ch/de-CH/Veranstaltungen/Fachkonferenzen-Wirtschaft/SIF-Digitale-Kompetenzen-im-Banking-2018-06

I am looking forward to the speech from
@Dr. Bernhard Koye, @Dr.Stefanie-Auge-Dickhut, @Dr. Kerstin Windhövel, @Sacha Gysel.

Here is the programme (in German)

programm

 

Please enjoy some more impressions form our past event at Microsoft

Responsible Investment Banking is a Network Sponsor of TBLI CONFERENCE NORDIC 2018, which will be celebrating its 21st Anniversary.

The TBLI CONFERENCE Series-TBLI CONFERENCE is the longest running (nearly 20 years) and largest annual global networking and learning event on Environmental, Social and Governance (ESG) and Impact Investment.

What to expect?

TBLi is the worlds leading authority on ESG and Impact Investing and has been curating content for TBLi Conference, for over 20 years.With a track record of over 20 years and 30+ events across Europe, Asia, Latin America and the US, TBLI balances high-level content and a focus on raising private capital for sustainable investments.

What to makes TBLI CONFERENCE unique?

  • High quality networking opportunities with a diverse audience.
  • A carefully curated program addressing a diverse set of topics of interest for both ESG as well as Impact Investors.
  • TBLI Workshops on case studies, market analysis and lessons learned.
  • Interactive TBLI Masterclasses on opportunities, innovation and risks.
  • Entrepreneur Salons featuring pre-qualified social entrepreneurs.
  • High-Level Plenary Sessions with experienced investors, social entrepreneurs, and Responsible Investment specialists.

Who is attending?

  • Asset Owners / Family Offices
  • Asset Managers
  • Government Funds
  • Development Banks
  • Responsible Investment Networks
  • SRI Specialists
  • Entrepreneurs

Testimonial:

TBLI has established itself as the most significant gathering place for those interested in sustainable and related investment strategies… it fosters a set of discussions that are critical to advancing not only the interests of those involved in sustainable finance, but in improving the understanding of mainstream investors with regard to the innovations taking place within the financial services arena.
Jed Emerson Founder Blended Valley Group

The TBLI conference is the one chance each year that new thinkers, clear thinkers, forward thinkers and old friends can get together and exchange ideas. What is discussed at TBLI often has a smart way of evolving into a marketplace initiative – investor engagement, sustainable theme funds, micro-finance, cleantech, private equity…. The impact of the conference is to be, a lightning rod that sparks important sustainable finance initiatives for the coming years.
Mark Campanale Executive Director, The Social Stock Exchange, London

Program TBLI CONFERENCE NORDIC 2018

Responsible Investment Banking

Karen Wendt

Invitation to attend the 7th edition of the Zermatt Summit

Invitation to attend the 7th edition of the Zermatt Summit at Hotel Mont Cervin September 21–23 2018, Zermatt, Switzerland. Register: https://www.zermattsummit.org/summit-2018/registration/

Dear friend,

We are proud to announce that ECCOS International is a network partner of the 7th edition of the Zermatt Summit.

Nature can change the way we do business. That’s the promise of “Humanising Innovation”, the 2018 Zermatt Summit.

For centuries, we have plundered nature to get what we wanted. At a closer look, if we use what nature generously provides in abundance, we can serve the needs of people while regenerating and re-energizing our environment. If we use the space and resources available we can grow an abundance of food and fuel as well as create jobs and income for all.

The speakers at the 2018 Zermatt Summit will turn existing business models upside down. They will present inspiring and disruptive cases that show that doing business inspired by nature will serve the needs of people and planet while generating better results for owners, employees, shareholders, suppliers and customers.
Let me know that you would like to attend and I will provide you with a promotion code for the event.
Y

Many of the cases and projects that will be presented—from seaweed and bioplastics to Internet over light waves—can be replicated around the globe. This provides unique opportunities to build new businesses and makes the 2018 Zermatt Summit a “must” to attend for business leaders, investors, thinkers and do-ers who want to lead innovation and contribute to groundbreaking change.

For more information on the program, registration fees, tickets, and speakers of the 2018 Zermatt Summit, visit our website: https://www.zermattsummit.org, or see the PDF program.

Please register with the discount code NETWORKPARTNER2018, which will provide a total discount of 20% on the entry fee.

For any further questions, we remain available,

Naturally yours,

Karen Wendt
ECCOS International

PS. A majority of conferences will be held in English but with French simultaneous translation.

Inspiring News from Pioneers on start-up innovation, alignment of interest and sustainability

 

At the Pioneers Festival in Vienna end of May I had the chance to talk to change-agents, leading entrepreneurs, business angels, impact investors and system changing innovators. Let me start with Daniel Kim from Lit motors, who designed two-wheeled vehicles with innovative and disruptive technologies to create the AEV (auto-balancing electric vehicle) – the”C-1″ and the Kubo cargo scooter. Kim did scientific research on high way commuter traffic in the US. It did not make sense he says to drive with a SUV alone 48 km to work.” Then came the idea for much lighter and energy saving technology. His fascinating journey from being a designer, then researcher and finally entrepreneur and fund raiser was compelling, in a nutshell the combination of know the world, combine know how and know who, know yourself and know how to be an entrepreneur.

Conrad Egusa, a former VentureBeat writer has started the PR company Publicize, his company is changing the way start-up approach PR. His begin his first journey as entrepreneur, when he was a student and opened a local community within Facebook and successfully advanced it to a university newspaper. When working for VentureBeat, the leading source for news & perspective on tech innovation he realised that the PR industry’s business model was broken for start-ups.

With Jon Teo Founder and Managing Partner of Binary Capital I spoke about ecosystems and the founding blocs of ecosystems. “For me, platforms are vehicles for audience and distribution and very different from ecosystems” he explained. Whereas platforms can be good at establishing a new way of communication and distribution, Ecosystems change the conversation, establish new commons and create a new philosophical foundation. Wikipedia succeeded because investors aligned with the philosophy of equal access to information for all, Facebook with the vision of designing yourself and Snapshot with making it easier of showing another side of yourself. Ecosystems change the way people talk about things.

Marvin Liao from 500 start-ups has been an angel investor; a mentor and accelerator prior to joining 500 start-ups as a partner. His credo is we have to make it easy for investees to succeed and give them all support we can Being an entrepreneur requires migration and immigration talent, a new mind-set and a new form of entrepreneurial education. The same applies to investors, he adds. And you have to be able to accompany your pre seed or seed investments through the whole growth cycle from seed to start up to growth and maturity.

Tim Draper is not only a super successful venture capital investor and incubator, but also likewise an innovator, accelerator, educator, funder, philanthropist and ecosystem creator. In July 2014, Draper received wide coverage for his purchase at a US Marshals Service auction of seized bit coins from the Silk Road marketplace website.

With Draper University, the Draper Associates Funds and Hero City he provides a full fledged ecosystem for investees in order to make them bolder, better entrepreneurs and more resilient. When I asked him whether it is to early to write for me on a new so far undisclosed project he answered, “oh, it is always the right time.”

Erik Bovee, Founder and Partner of Speedinvest I had a great conversation on being a Seed Investor, Speed Investor and Mentor. He started consulting start – ups prior and this developed into being a seed investor. “There are not a lot of serial entrepreneurs in CEE, he told me. So start – ups need to learn, how to hire, how to scale, how to raise funds and how to access International Markets.” Therefore Speedinvest often takes a co-founder role. Their fund model and structure for seed investments is unique with no hurdle rate and no interest carry and puts emphasis on the alignment of interest between investee and Speedinvest. The intent of the model is to raise the floor and have less burnout of start-up founders.

Keyvan Peymani, Venture Capitalist, Investor, Entrepreneur and Tech optimist is looking for sustainable innovation and impact in his investments. Venture Capitalists have to offer capital and contacts, empower entrepreneurs, he says. In the seed capital ecosystem he sees an explosion of seed capital, venture capital and equity, a Morris Law like activity happening there. The next step needs to be partnerships with Lead Companies, joined Tech Events. Big companies could be “friendly customers “ of start-ups, try and test their blueprints and start-ups could do reverse mentoring for Leading companies.

It was inspiring talking to Ryan Bethencourt. He is a scientist, entrepreneur and a pioneer in the DIYbio movement best known for his work as program director and venture partner at Indie. Bio, a biology accelerator and early stage seed fund. International VC firm SOSVentures has been capitalizing on the now buzz worthy biotech investment trend with the creation of IndieBio, the first accelerator to focus on just life sciences. Ryan’s investment philosophy is addressing global challenges with biology and tech. One of his favourite investment stories is Memphis Meet, a company growing meet in a lab. “It is 20 times less resource intense, no human rights violations like in the cattle farming, no slauther houses and no animal dying2, he says. The technology uses less water, less CO2 is emitted and the meet is vegan. The technology is incredible disruptive and also profitable. It opens the door to a post animal economy, Ryan adds. Bacteria are biological nano-machines and he believes in this form of bio-nano – technology.

Conventional nano-technology has not delivered he says and it will be very hard for conventional technology to compete.

Chancellor Kern was also present at the start-up event of the Pioneers Festival. We need a start up mentality, a new deal for start – ups in order to foster innovation and create wealth. He spoke to the right High Five community. Over 500 investors were present at the festival.

Resources times social networks creates potent triple bottom line returns

Reflection of the CEE Impact Day at Impact Hub Vienna

How social and environmental challenges can be turned into opportunities, return and potential using market concepts could be witnessed at the CEE Impact Day in Vienna. Anything bad is good for you – if we develop the ability and agility to see challenges as investment opportunities and tackle them though impact investing and social entrepreneurship. The CEE Impact Day at Impact Hub Vienna has given strong evidence of this new nascent market paradigm. While the social welfare state has been a successful concept to address the challenges of the 20th century, social entrepreneurship and impact investing may well be the recipe of the 21st century. While many old systems are running dry of money and need to reinvent themselves or die, the movement building works undertaken by pioneers like Charly Kleissner , Impact Hubs, Ashoka and the Social Stock Exchange- to name a few, begin a to win momentum. New forms of co-operation, co-work and a new language are proliferating into investment and social banking. Social Banking and Impact Investing uses the nowadays highly sophisticated instruments developed in investment banking like social bonds, green bonds and pay – for – performance schemes and new intermediaries like the social stock exchange alongside with a strong focus on creating solutions for social and environmental challenges, the world is facing today. The Impact Hub has a centre role in establishing the fertile ground these new potentials. Some examples of how these Social Enterprises can be profitable were presented as award winners at the CEE Impact Day. I have picked Magdas Hotel, a hotel run by 20 refugees and 10 professionals addressing the challenge of migrants to find work. The hotel is a rebuild retirement home, offers rooms in a chilly atmosphere and at the same time a wide range of cultural events.
A lot of players support this new field of enterprising and investing like Erste Bank Foundation who has co- initiated the first Social Bond in Austria, Impact Hub who runs various programmes in cooperation with partners like the Investment Ready Programme (IRP) and the Scaling Programme to mane a few.

The CEE Impact Day provided strong evidence on how successful the Hub has been in establishing a new eco-system for triple bottom line and impact investing and that it has been a change agent and enabler for social entrepreneurship, NBO and Tec’s. I differentiate the two by the indicator whether or not a sound theory of change is applied. Triple bottom line investment does not necessarily imply a theory of change, impact investment does. Charly Kleissner, Co-Founder of KL Felicitas Foundation reiterated and emphasized the importance of the movement building works in addition to a TBL approach in investing, which needs to go on with investees, investors and intermediaries and develop increased attraction and buy in. Charly himself once again demonstrated in his speech that he is an excellent ambassador, supporter and campaigner for impact investing and social entrepreneurship and announced that he will make available his portfolios for scientific research on impact investing to universities and scientists. Uli Grabenwarter, Deputy Director Equity Investments of the European Investment Fund stressed “ we have to hold ourselves (investors) responsible for the success of impact investees and do everything to support them.

Borsa Istanbul

There are stunning things going on in the Middle East and in particular in Turkey regarding the sustainable investment mission. Borsa Istanbul has recently created the Borsa İstanbul Sustainability Platform. I am more than pleased ot welcome Borsa Istanbul and its Borsa İstanbul Sustainability Platform as a new network partner of Responsible Investmentbanking.
The Borsa İstanbul Sustainability Platform aims to create a sharing network which enables result-oriented and effective realization of the sustainability activities and powerful discussions on future joint steps in the field of sustainability in Turkey. The Sustainability Platform works on increasing the awareness and knowledge regarding sustainability, providing its support to enable sustainability issues to take part in the relevant legislation and regulations, promoting sustainability practices and collaborating with related  international agencies. You can find the platforms in the section Network partners and here  http://www.borsaistanbul.com/en/corporate/sustainability/sustainability-platform