Key stock investment strategies and best books to read about: Value Investing vs. Growth Investing.

There are two main approaches to choosing stocks for investment value investing and growth investing. There are 2 camps of investors that follow each. Each approach has its own gurus and famous proponents.

In the search for value stocks. Value investing approach. Best books about Value Investing.

The value investing approach is based on assessing the value of a stock and a company; proponents of this approach are called “value investors”. These investors, when selecting shares, pay the most attention to the analysis of the company's value. If a stock, according to their calculations, is undervalued, they buy it. If overpriced, they sell.

Benjamin Graham (the author of the acclaimed book “The Intelligent Investor”) is the founder of the stock price analysis and value investing approach. Warren Buffett is the most famous value investor in the world who became famous for his ability to correctly evaluate stocks. His fund brings stable high returns to shareholders for many years (book "The Warren Buffett Way: Investment Strategies of the World's Greatest Investor", Hagstrom R .G.).

Proponents of value analysis widely use fundamental analysis to assess the value of a company (such company indicators as fixed and current assets, profit, debt level, depreciation, etc.). The purpose of their analysis is to search for undervalued shares, which may show growth in the future due to price recovery to the level of the company's “fair” value.

In the search for growth stocks. Growth investing approach. Best books about Growth Investing.

A different approach to investing in stocks is used by the so-called growth investors who use a growth strategy rather than a stock price strategy. The idea here is as follows: you need to choose those stocks that until today have shown the growth due to the constant growth of revenue and profits. If a stock shows constant growth, you buy it with the expectation that the company will continue to develop in the same way and its shares will grow at an accelerated pace. Here, the "internal" value of the company practically does not matter. Often, investors in this group buy shares even at a higher price than their current "intrinsic value" - but this is done with the expectation that their value will rise significantly soon.

Growth investors believe that fortunes are made with the most fundamentally and technically strong stocks, not those that can be bought cheaply.

Advocates of the growth strategy use both methods of fundamental analysis (the most attention is paid to the dynamics of revenues and earnings per share) and methods of technical analysis (the most attention is paid to the relative strength of prices, trends, figures on charts, trading volume).

The most prominent representatives of this group:

William O'Neil (books "How to Make Money in Stocks: A Winning System in Good Times Or Bad",

"The Successful Investor: What 80 Million People Need to Know to Invest Profitably and Avoid Big Losses"),

"The New Market Wizards: Conversations with America's Top Traders" by Jack D. Schwager.

Combining value and growth investing strategies. Best books about combining both strategies.

Many long-term investors combine some aspects of value strategy and growth strategy to identify undervalued stocks that have significant upside potential in the coming years. These investors are called growth & value investors and tend to buy "growth" at a reasonable price. Examples of such successful Investors:

Peter Lynch, Fidelity Magellan Fund (book "Beating the Street",

"One Up On Wall Street: How To Use What You Already Know To Make Money In The Market"),

Philip Fisher (book "Common Stocks and Uncommon Profits and Other Writings"),

Martin Zweig (book "Winning on Wall Street").

To summarize below are the main approaches to investing in stocks

  • Value Investing: Assess the “intrinsic value” of a stock, buy undervalued stocks.

  • Growth Investing: Evaluate the growth of the company and the growth of the share price, buy fast-growing shares of actively developing companies at any price.

  • Growth & Value Investing: Combines both approaches to assess the "intrinsic value" of stock and identify high-growth companies. Buy "growth" at a reasonable price.


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