At the Morningstar Investment Conference 2014, Bharat Shah, Executive Director, ASK Group, shared his views in a panel discussion on value investing. Below is an excerpt.
On whether he tilts towards the growth or value style of investing.
I believe that the debate between value and growth is an artificial one. Both are the same sides of the coin and cannot be straight-jacketed into two separate categories.
If a business is not going to grow, I don't think there is any value in it at all. For a growing business to be bought and to make investment returns, it must have a component of value defined as a margin of safety or a price/value game.
But it's important to put in place what exactly people mean by value.
Do you mean mere cheapness of an arithmetical variety? In a market today that has supposedly gone up, out of some 6,000 odd stocks, you still will get 70%, 80% of the market at a PE mathematical number of less than 10 or in a single-digit.
So that pure cheapness or cigar-butt kind of investing that Graham advocated, I am not really fond of. Graham's ideas were formed during the times of The Great Depression. So his thinking was coloured by that. At that point of time, everything was so cheap because markets had lost the 87% from the peak. So anything that you chose, by whatever parameter, was likely to be quite cheap.
Phil Fisher taught us that ultimately without the element of quality, pure mathematical cheapness has very little relevance and meaning.
On what he looks for in terms of quality....
