Value vs. Growth Investing

You might be initially confused by these terms or even suspect they aren’t that different in terms of what each model offers you as an investor, but they are very distinct approaches, and it’s good to understand these two schools of thought as you invest. This understanding could help you make important investment decisions, both now and in the future.

At first glance, some of the advantages to each approach may not be immediately obvious, depending on what sort of market you are facing. There is an element of timing to both value and growth investing, and that concept may be helpful in understanding the differences between the two. [1]

Investing for Value

Value Vs. Growth InvestingValue investors look for bargains. That is, they attempt to find stocks that are trading below the value of the companies they represent. If they consider a stock to be underpriced, it may be an opportunity to buy; if they consider it overpriced, it may be an opportunity to sell. Once they purchase a stock, value investors seek to ride the price upward as the security returns to its “fair market” price – selling it when this price objective is reached.

Value investors use detailed analysis to help identify stocks that may be undervalued. They’ll examine the company’s balance sheet, financial statements, and cash flow statements to get a clear picture of its assets, liabilities, revenues, and expenses.

One of the key tools value investors use is financial ratios. For example, to determine a company’s book value, a value analyst would subtract the company’s liabilities from its assets. This book value can then be divided by the number of shares outstanding to determine the book-value-per-share – a ratio that would then be compared to the book-value-per-share ratios of other companies in the same industry or to the market overall.

Investing for Growth

Growth investors use today’s information to help identify tomorrow’s strongest stocks. They’re looking for “winners” – stocks of companies within industries expected to experience substantial growth. They seek companies positioned to generate revenues or earnings that exceed market expectations. When growth investors find a promising stock, they may buy it – even if it has already experienced rapid price appreciation – in the hope that its price will continue to rise as the company grows and attracts more investors.

Where value investors use analysis, growth investors use criteria. Growth investors are more concerned about whether a company is exhibiting behavior that suggests it will be one of tomorrow’s leaders; they are less focused on the value of the underlying company.

For example, growth investors may favor companies with a sustainable competitive advantage that are expected to experience rapid revenue growth, effective at containing cost and staffed with an experienced management team.

Value and growth investing are opposing strategies. A stock prized by a value investor might be considered worthless by a growth investor and vice versa. So, which is right? A close review of your personal situation can help determine which strategy may be right for you.

“It is better to fail in originality than to succeed in imitation.”

– Herman Melville


Recipe of the Week

Roasted Sunday Chicken

Serves 4

Ingredients:

  • 2 bunches of fresh herbs, such as basil, flat-leaf parsley, marjoram
  • 1 lemon
  • 4 fresh bay leaves or 3 dried bay leaves
  • 1 2- to 4-lb. whole chicken (preferably, free range)
  • Olive oil
  • 1 stick butter
  • 2 sprigs of fresh rosemary

Directions:

  1. Place a roasting tray in the oven, then preheat the oven to 425°F.
  2. Chop the herbs, cut the lemon in half, and tear or crumble the bay leaves.
  3. Rub the cavity inside the chicken with sea salt.
  4. To season, carefully grab the skin at the top of the chicken breasts and gently pull away from the meat of the breast. Rub in salt, insert pieces of butter, and push in most of the chopped herbs.
  5. After putting the lemon halves, bay leaf and rosemary sprigs inside the chicken, return the skin of the chicken breast over the flesh.
  6. Tuck the wings under and firmly tie up the legs.
  7. Rub oil and butter over the chicken skin, sprinkle on the remaining herbs, and add salt and pepper, to taste.
  8. Put a few small slashes in each thigh to allow the heat to penetrate directly.
  9. Take the heated tray out of the oven and drizzle with enough oil to coat the pan. Put the chicken into the tray (breast-side down and leaning to one side), then place in the oven and brown skin. Roast for five minutes, then lean it to the other side. Cook for an additional five minutes, then place the chicken on its bottom and cook for approximately one more hour until skin is crispy and golden brown and juices run clear.

Recipe adapted from jamieoliver.com[2]


Tax Tips

What Is the Bank Secrecy Act?*

In a partnership with the U.S. National Money Laundering Strategy, the IRS requires businesses to keep records and file reports that could be useful in the detection of money laundering, criminal enterprise, terrorism, or tax evasion. Here are some of the financial situations that could require reporting:

Report of Cash Payments Over $10,000 Received in a Trade or Business
If your business receives more than $10,000 in cash from one buyer (single transaction) or two or more related transactions, you’ll need to file Form 8300.

Report of Foreign Bank and Financial Accounts
If you live in the U.S. and have financial interest or signature authority over a foreign financial bank account, mutual fund, or trust that exceeds $10,000 anytime during the calendar year.

Money Services Businesses
If you’re in the business of cashing checks, currency exchange or selling money orders, traveler’s checks, or prepaid access products for an amount greater than $1,000 per person, per day, in one or more transactions.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[3]


Golf Tip

Emerge from the Sand

Everyone loves the beach… unless you’re golfing. Getting stuck in the sand is the best way to torpedo your score. To get out of the bunker, most golfers try technical swings that involve their wrists.

Leave that stuff to the pros and go for something more predictable. Try lining up in the middle of the ball and put most of your weight on your forward leg. Keep your wrists straight, swing the club back to hip level, and then swing through the ball. You should try to end with the club head at hip level. With a little practice, this should get you out of the sand nearly every time.

Tip courtesy of Michael Easter | Men’s Health[4]


Healthy Lifestyle

Gut Health for Total Wellness

When your gut is unhealthy, you’ll probably feel it. From weight management and mental health to mood and immunity, the health of your gut matters significantly to your overall wellness. If you consume a lot of alcohol, sugar, and the wrong kinds of fats, you could have poor gut health. Here are a few tips to help balance your good bacteria, which could assist in maintaining (or improving) the microbiome of your gut:

Eat a wide range of high-fiber foods: Eat legumes, beans, and fruits, which are all high in fiber.

Eat fermented foods: Eat yogurt, kefir, sauerkraut, and drink kombucha to increase dietary intake of good bacteria.

Eat foods that contain prebiotic fiber: Eat artichokes, bananas, asparagus, oats, apples, and other foods that contain prebiotic fiber, a special carbohydrate that facilitates the growth of good bacteria.

Take a probiotic supplement: These supplements contain live bacteria, which can help maintain levels of good bacteria in the gut. Probiotics can also help restore bacteria levels in the gut when they are compromised, such as after taking antibiotics.

Eat food high in polyphenols: These are plant compounds found in red wine, green tea, dark chocolate, olive oil, and whole grains.

Take antibiotics only when necessary and as prescribed: Antibiotics kill both good and bad bacteria. So, replenish your gut’s microbiome after you’ve completed your course and only take these medications when necessary.

Tip adapted from Healthline[5]


Green Living

Cleaning Products and Your Health

Harmful chemicals may enter the environment through our use of household cleaners. When toxic cleaners enter our waterways and air, they can adversely affect the health of humans and animals, alike. With the help of common household items, however, you can make your own cleaning products, which may be kinder to the planet and your well-being.

All-purpose cleaner and deodorizer
Mix 4 Tbsp. baking soda and 1 qt. warm water, and with a clean sponge, use to wipe clean your fridge, counters, and appliances.

Glass cleaner
Take 2 cups of water, ½ cup white vinegar, ¼ cup rubbing alcohol (70% concentration), and 1 or 2 drops of orange essential oil. Put in a spray bottle and shine it up!

Heavy duty scrub
Half a lemon and ½ cup of borax will remove rust stains and grime off sinks and tubs. Just dip the lemon in the borax and scrub away (not for use on granite or marble).

Tip adapted from Good Housekeeping[6]