Warren Buffett’s Berkshire Hathway is winning Cathie’s Ark Innovation on the YTD chart. With a “value approach” to investing, Berkshire is on a 29.72% profit, while Ark Innovation, on the “growth approach” edge, is reporting a -25%. The last month has been critical as ARKK has registered a loss of -20.43%, while Buffett’s company has reported a 3.68% profit.
Berkshire has primarily benefited from Apple, which has increased by 17% in the past month. Apple indeed accounts for more than half of the equity portfolio of the investment firm and is Berkshire’s most significant stock position. On the other side, ARKK’s portfolio, including Zoom Video Communications, Coinbase, Roku, Teladoc, has significantly lost price during the last month.
Value investing is a style of investing where an investor looks for undervalued securities. It’s also known as buying low and selling high. At its most basic level, the idea behind value investing is that it takes advantage of market inefficiency. Market efficiency is when the price of a stock or share reflects all available information about the value of the company’s assets, earnings, and prospects. We can expect companies to trade at intrinsic value when there’s market efficiency. However, suppose the market doesn’t show enough evidence to support the prices being paid for stocks. In that case, investors might buy more shares than they would otherwise because they’re buying at a discount to their intrinsic values in hopes that their investments will increase in value over time.
Value investing should be approached within an investor’s long-term portfolio strategy. However, it provides opportunities for greater returns and comes with greater risk, which means investors should prepare accordingly. Learn about how you can become a great value investor by reading the Margin of Safety book by Seth Klarman which discusses the philosophy of value investing strategy.
Growth Investing is a strategy that aims to produce capital gains and dividends by investing primarily in companies that have the potential to expand their earnings. In general, it is a strategy of investing in companies with high growth rates and marketable securities. The idea behind this strategy is that an investor will earn more money in the future by buying now rather than later.
Many investors assume the significant risk involved with growth investing because they may be invested in companies that have not yet been profitable. As a result, many people believe it’s risky if they don’t know how long the company has been around or how long it will take for their investments to pay off. However, there are ways for investors to minimize these risks and still make investments into growth stocks without putting up too much money.