Value+Growth” Investing Strategy, but with a Twist
There was recently a great knowledge session organized by AIF and PMS with Mr. Neil Bahal (Founder and CEO of Negen Capital PMS) who had a conversation with Mr. Vikas Agrawal (Founder and CEO at AIF and PMS Experts India Pvt. Ltd.).
Neil Bahal has experience of 21 years and is one of the youngest portfolio managers in India. The session gives insights into how to start investing in equity markets and why you should enter this industry. One interesting thing that you will learn in the session is to hold shares in a good company or invest in SIP. The question is how do you choose your portfolio? And how do you create wealth by investing in good companies?
Stock Performance is a combined result of the bull and bear market. A stock performs according to the conditions of the market. Important is to split the market in two parts – normal market situation and special market situation. In today’s digital world the market is valuing companies as per their performance. All the information is with the public and investors are using value investing to grow their portfolio.
What is a Special Situation Market?
Whenever there is a company that jumps from a normal situation to a special situation, then that particular stock is kept under a special situation market. For example, ITC announced that it is going to demerge its conglomerate business. All the segments will be divided and managed by different individuals. Now all the different businesses will get their different valuation that will be different from the Tobacco business.
Due to COVID-19, the world in itself is going through a special situation. This market will come back to normal. Therefore there are certain stocks that you should avoid –
#1. Cyclical Stocks
These are the stocks that have shown results only during COVID. These stocks will go back to their normal prices. These stocks have not created any wealth during last 15 years and they are further not going to give any returns
#2. Regional Banks
These industries lack the technology and the return of capital is very low in these industries. These industries cannot compete with big banks. They are less in terms of technology, compliance, customers, and sales.
#3. Construction Companies
They have heavy capital expenditure and they are in the nature of upfront expenses. The income cycle is late and debt is high. All these factors make these stocks less appealing
So it is important to invest in companies that are good in value and have growth prospects as well.
What is Value Investing?
Value investing is buying a stock at a price that is less than its intrinsic value.
Intrinsic value = Assets – Liabilities
If you are getting a stock less than the intrinsic value, you have invested wisely and that is value investing. Today is the age of information and you can get all information about the company readily. So you have to search for a special situation where you can go for value investing.
So it becomes important to look for Value+Growth investing.
What is Value+Growth Investing, with a Twist?
There are two types of investors –
One who are looking for quality stocks and theta re ready to pay anything for those stocks
Second, there are investors who are buying cheap stocks just because of the reason that they are available at low prices.
Both these strategies of purchasing stock are FLAWED.
There is a breakthrough strategy that should be followed – Getting stocks that are of good value and at the same time they are available at low prices.
Whenever the market crashes then you can get the stocks that are of good value at cheap prices.
To conclude it is important to find a special situation in the market and go much above normal value investing to value investing with a twist, i.e. to look out for companies with good value and growth prospects as well. You can refer our webinar to get more detailed information about the topic – https://www.youtube.com/watch?v=oOZ-G-NJ3PQ&t=1018s
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Also Read – Top 5 Reasons You Should Invest in PMS