Thursday, April 17, 2008 0 comments ++[ CLICK TO COMMENT ]++

How Can You Tell A Growth Investor From A Value Investor?

This is partly tongue-in-cheek so don't take it too seriously (in some sense, there is no such thing as growth or value investing--it's related)... What sort comment would you expect to hear only from a growth investor? Here is an example of a post by someone on the MarketWatch message response to a story on Merrill Lynch:

MER's loss is in the billions and down only 1.8% today, but NOK qtr profit rises 25% and is down 11%. I wonder if it is to late for NOK to get into the subprime market?

I hate to criticize fellow investors because I'm just a newbie who makes questionable decisions as well, but this one is way too obvious. Clearly, the poster doesn't understand the notion of market expectations. Typically I hear comments like this from momentum investors or growth investors. Some investors are actually surprised when a stock drops even though profits rise substantially. The problem, which is endemic in growth investing, is that rosy scenarios may be priced into the stock. So even if profits are strong, it may not be enough. This is one of the issues that value investors try to avoid by looking at cheaper stocks.


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