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Aug
19
Investorfile still advocates a value approach to investing in growth
Posted by: Gerry Wimmer
8/19/2018
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Buying small cap stocks on a value basis rather than trading momentum is a more prudent investment.

We believe the Investorfile blog continues to offer a unique perspective among the many newsletters promoting small/microcap investment ideas by steering investors to acquire growth stocks on a value basis rather than on a momentum basis.

Investors who buy a small cap stock based on its trading momentum are engaged in a short-term trade which may or may not work out. They often ignore the fundamentals and valuation of the stocks they buy which can lead to heavy losses after the stock peaks. At this point the price of the stock could take a long time to recover.

Although Investorfile’s Top Ideas are headlined as small cap value stocks, they are still growth companies. When the Investorfile blog initiates a new Top Idea we place close attention to fundamentals. We believe a stock is undervalued based on EBITDA/Enterprise Value, Earnings per Share (EPS) or revenue valuation metrics looking forward no more than 12 to18 months. We also favour companies with very strong balance sheets and prudent Management teams for long term growth.

Investorfile sets its accumulation price targets on the initiation of our Top Ideas to specify an opportunity for investors to buy shares in a company at attractive valuation levels and before the broader investment market recognizes the stock's potential. Over the longer term, we feel this approach provides the greatest upside and some downside risk to overpaying.

We believe our stock price targets represent an opportunity for investors to take advantage of the market's inefficiency from the mispricing of selected growth stocks. Generally speaking, when our price targets are exceeded, the Company’s operations are excelling and the broader investment community has begun following and investing in the stock.

Our "accumulate to” targets provide investors with a guideline to average their stock purchases under our target price. By doing so, we feel the average cost base on the investment is still low, which provides some margin of safety should the stock price fluctuate from unexpected market conditions.

All that said because the market for growth stocks can be very volatile, during down times investors who invested in small cap stocks on a value basis are not feeling the same financial pain as investors who bought in on a momentum basis.


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.
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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.