Should I do Growth or Value Investing?

Growth InvestingValue Investing
Growth Rate5 – 10%
Price Earnings Growth< 1%
Return on EquityHigh
Price/ BookLowPrice ≈  Book Value
Price/ EquityHighLow
Dividends / EquityDebt ≈  Equity
DividendsHighConsistent Payouts

Operating Performance

1. Low R&D expense, depreciation and interest expense

2. Net Income/ Revenue ≈  10- 20%

3. Healthy cash level

4. Increasing retained earnings

Qualitative Factors

1. Durable competitive advantage.

If there is no comparative advantage, then choose firms with government intervention that favors the incumbents

2. Geographical diversification

3. Easy to understand business models

READ: Stock Picking Strategy – CANSLIM

When to SELL

1. Loss of Competitive advantage

2. Price/ Earnings per share > 40

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