Think growth and value can’t coexist? Think again.
Applied Finance & co-founder Rafael Resendes, were recently featured in Institutional Investor. In the article, Value Investors Don’t Need to Avoid Growth Companies. In Fact, Doing So Can Hurt Returns, Ms. Chung outlines how Applied Finance is redefining Value Investing & how traditional value metrics are inadequate in identifying stocks trading below their intrinsic value.
Much has been said about the long-term underperformance of stocks with many “value” managers explaining away the poor performance and exhibiting a hopefulness for a big “value” turnaround. Ignoring growth companies and relying on valuation shortcuts (price multiples) that don’t truly get to the heart of a company’s underlying value is not “value” in our definition.
“We’re redefining what value is. The term has been tortured and confused with cheapness.” Mr. Resendes says. In our view, growth and value can coexist and regardless of what a price multiple/cheapness indicator might imply, high multiple companies can be undervalued in terms of their overall valuation. Blindly dismissing these firms will lead to missing countless opportunities for large returns.
As always, there are no shortcuts to understanding valuation.
To read the entire article…Click the link below.