GMO’s Value vs. Growth Investing

GMO’s Value vs. Growth Investing

Investing is one of the best ways to accumulate wealth over some time. Investors will adopt different strategies that will help in making money through investments. However, getting to choose what strategy best works for you takes time and effort. The two conventional approaches adopted by investors are the growth and value strategies. These strategies differ considerably based on the objectives sought to be achieved. In this case study, Mayo and his partners in the business have chosen the value investing strategy since it aims to meet the business philosophy. Thus, they have analyzed several value investment stocks such as CVS, Donnelly as well as Manor in a bid to support their investment perspective.

Value investing refers to a strategy that considers buying undervalued stocks. The benefits of value investing are realized when the selected firm is financially sound and the undervalued stock is based on the temporary inefficiencies in the market. On the other hand, growth investment strategy refers to the investments where the trend is indicative of returns providing above the market returns. At the same time, the risk attached falls below investor expectations. Generally, the value and growth pe0rspectives differ in the way investors perceive them and in the market as well. However, their objectives are to maximize returns either through underpriced stocks as compared to their intrinsic values or through higher returns as a result of the firm’s growth.

GMO adopts the value investing strategy. This choice of investment strategy is favored by the firm based on the rationale that after the depressing forces on the price have diminished, the stock’s market prices can only rise in a bid to realize the stock’s hidden potential at a future period. Thus, the assumption is that once the market inefficiencies are identified, the prices will bump up, thus increasing the investor’s value through capital gains on those stocks.