Incorporating Growth to Value Investing

Abstract

Various investing strategies can basically be classified into two types, namely value investing and growth investing. In value investing investors search for stocks with price less than their intrinsic value. In growth investing investors search for stocks with high growth potential regardless of price. It is common for such stocks to have higher price compared to their intrinsic value. Thus value investing and growth investing are usually mutually exclusive. Various researches have shown that value investing strategies yield higher return compared to growth strategies. However the existence of large number of mutual funds and investors who follow growth strategy shows that this strategy is not without merit. This study develops a method where growth factor is incorporated to value investing and thus profiting from both high growth potential and low price. The result of this study will be interesting for stock investors and mutual fund.