69th International Atlantic Economic Conference

March 24 - 27, 2010 | Prague, Czech Republic

Investment in Value and Growth:  Theoretical Aspects

Saturday, 27 March 2010: 11:15
Malgorzata Tarczynska-Luniewska, Ph.D. , Department of Economics and Management, University of Szczecin, Szczecin, Poland
Long term investment can be done by using methods of fundamental analysis. Fundamental analysis is a group of methods which concern profitability of securities through a prism of estimation of fundamental and economic condition of company, its stability on the market and development outlook. The main issue in such kind of analysis is description of security internal value and comparison with market price. Investment will be profitable when internal value is higher than market price. In classical point of view fundamental analysis require analysis in four areas:
·        macroeconomic analysis
·        sector analysis
·        evaluation of economic and financial condition (with classical indicator analysis and market ratios)
·        valuation of the company and its internal value.
In long term investment it is possible to use certain strategies of investment: investment in value or in growth. Such kind of strategies are constructed using proper information which come from fundamental analysis.
The strategy of value investment concerns investment in undervalued securities. The strategy of growth investment concerns investment in companies which have big potential and dynamic growth.
In both strategies a very important issue is: economic and financial condition of the company. It means, that companies should have good fundamental base – good fundamental power.
The both approaches in investment should guarantee for investors over and above increase the rate of return higher than on average (but it works in long term because it is a long process) and reduce risk of investment. But these strategies are different because they put emphasis on some factors (information) which are proper and compatible with guidelines of given strategy.
In the paper were presented theoretical aspects of value and growth investment strategies, their similarity and differences.
These strategies can be used for:
·        investment in individual securities
·        portfolio analysis as a strategy (procedure) for security selection.
In the empirical part of the paper were presented and compare portfolios constructed using main guidelines of presented strategies. All researches concern WSE.