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The Perfect Mix of Value and Growth Investing - Views on News from Equitymaster
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The Equitymaster Research Digest

The Perfect Mix of Value and Growth Investing
Jul 15, 2016

Back in 2012, a clutch of business magazines profiled a gentleman named James Wang. Oceanstone fund, Wang's fledgling mutual fund, seemed to have come out of nowhere to become the best performing mutual fund in the US.

His success wasn't based on just one annual performance. Oceanstone towered over the rest for as long as five years. Its 40.5% annualised returns not only dwarfed index returns; they were nearly three times higher than the nearest competitor's.

How was James able to put up such a stellar show? What was his secret sauce? Well, I must say his method seemed odd to me. But it made sense.

The two camps

As per James, the investor community can be divided into two camps. The growth camp and the value camp. Look at it like this. The intrinsic value of the company can be arrived at using the following equation:

IV = IV/E * E.

Here, IV is the intrinsic value of the company. IV/E can be thought of as the P/E ratio. And E is earnings from the last twelve months.

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