Growth investing

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2. Comparison with value investing

Growth investing is often contrasted with value investing in stark fundamentalist terms. The traditional view is that:

• value investors look for shares that are cheap in relation to the net asset value of a company
• growth investors are only interested in earnings growth

and never the twain shall meet.

In fact, there is common ground between the two. Value investors are very interested in earnings if they can acquire them cheaply enough (i.e. on a low P/E), and growth investors don't completely ignore things like company debt and balance sheet ratios.

Nevertheless - there is an important underlying distinction between the methods:

• value investing is based entirely or mainly on quantitative criteria (numbers): on asset values, on cash flow, and on discounted future earnings.
• growth investing is based on qualitative criteria: on value judgments about the business, its markets, its management, and its ability to extract future earnings growth from its industry.

The successful value investor is analytical, patient and prudent. The successful growth investor may have the first two qualities, but is likely to be more open to risk, and will be willing to follow his instincts.

1. What is a growth stock? 2. Comparison with value investing 3. Traditional characteristics of a growth stock 4. Anatomy of a growth stock - Peter Lynch 5. Ten dos and don'ts from Peter Lynch 6. Jim Slater - The Zulu Principle 7. Earnings growth 8. The PEG factor 9. Competitive advantage 10. Do growth stocks have to be small? 11. A short diversion into internet stocks 12. When to sell a growth stock 13. Other factors 14. Case study of a growth stock - Sage 15. Conclusion

• Value Growth Investing
• One Up on Wall Street