Investment Strategies

Question 1

Growth

Answer 1

Companies with high growth aspects, usually reflected by a high P/E ratio.
Track record of growth in EPS
Low P/E relative to growth
Good cashflow
Optimistic annual statement
Competitive advantage

Question 2

Value

Answer 2

Companies that are undervalued, usually reflected by a low P/E ratio.
High dividend yield
High Price to Book ratio
High Price to Sales ratio
Long term investments

Question 3

Growth at a Reasonable Price (GARP)

Answer 3

Combined approach of Growth and Value investing, good record of posting growth without attracting a high valuation.
Growth oriented stocks with low P/E ratio
PEG ratio important to making investment decisions
Often achieved by investing in index funds that achieve this strategy

Question 4

Momentum

Answer 4

‘Greater fool theory’, buy high but sell higher.
Influenced by trends and seeks to make gains over the short term, before trends change - opportunity risk
High turnover can incur high transaction costs which can impact returns

Question 5

Contrarianism

Answer 5

Going ‘against the grain/herd’ and investing in out of favour options.
Similar to value investing, a confident valuation is required for the investor.

Question 6

Socially Responsible Investing (SRI)

Answer 6

Reflects the client’s ethical, moral, religious or
socially responsible beliefs and can influence their investment choice.
Sustainable finance is about taking environmental, social and governance (ESG)
considerations into account when making investment decisions.