Value and Growth
Over the long term, value investing outperforms chasing stories in the growth side of the market, but that does not mean value investing is an easy path to success. Many amateur investors and average advisors fall prey to low P/E ratios and high dividend yields which makes them prone to value traps. Our approach is to combine the best of value and growth investing, to find attractive investment opportunities that are trading at a discount to their intrinsic value and whose business has sustainable growth drivers. We call this Value + Growth.
Most novice investors and advisors rely heavily on basic valuation metrics, but we know that simple P/E ratios or growth rates do not go far enough. The goal is to screen for deep metrics that show companies consistently provide value to shareholders and trade below their intrinsic value. It is also crucial to understand how to compare the numbers within industries and sectors to find the best of breed. By relying heavily on the numbers we are able to reduce bias and uncover value in any part of the capital markets, while most other financial advisors chase value traps or investment fads.
Many of the most important aspects of securities analysis comes down to factors that cannot be expressed succinctly in numbers. This takes years of experience to understand the unique dynamics of each industry like regulation, competitive landscape, intellectual property, etc., and how management's strategic plan fits in that framework. This analysis is vital because investment success relies heavily on how the company will do in the future, and prior success does not guarantee a bright tomorrow, even though most seasoned advisors rely on past performance instead of skating where the puck is going. We are careful to find assets that are highly likely to continue the success that brought us to them through our quantitative analysis, and we do that by making sure management is pointing the firm in the right direction.