Value Investing (2)
February 28th, 2008 Ogbuotobo Chuks || chuks@stockmarketnigeria.com
By Ogbuotobo Chuks
Higher return for higher risk
Research findings have also shown that in good times as well, value investing pays sometimes even better than growth stocks in the long-term. When there is a general rally, they tend to move up in price in sympathy with the market leaders. Small changes in price tend to produce large percentage increases in return.
When a company’s operating performance goes down, the effort to restore the performance quality has been found to be much more vigorous than the effort growth companies put in to sustain the growth rate.
That tends to confirm that value stocks are indeed the first grade of growth stocks.
Don’t play with short-term capital
Those who have studied value investing extensively in other financial markets advise anyone saving for a distant goal like retirement to forget growth stocks and focus on value investing completely. That view appears rather extreme.
Well, I consider a blend of value and growth stocks an appropriate portfolio mix for people with patient capital. What is required is to have the right type of investing fund that can be committed for a fairly long period.In prospecting for value stocks, note that what you are looking for are equities that have uncommon values. You are not looking for inexpensive stocks that deserve their low valuation. You are out to find relatively inexpensive stocks that the market has either overlooked or beaten down.
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