Finding Long-Term Growth Beyond Value
The difference between value investing and growth investing is that the latter is about finding companies that will continue to grow and make money regardless of their valuation, says Stephen Grant of Value Line Premier Growth Fund.
Gregg Early: We’re here with Stephen Grant, fund manager of the Value Line Premier Growth Fund (VALSX). Stephen, I wanted to ask you: in this kind of environment, how do you go about looking for growth? Where do you find the value?
Stephen Grant: Well, the Value Line Premier Growth Fund has been around since 1956, and we certainly have seen all kinds of markets over the years. I personally have been managing it for close to 20 years.
Our main philosophy is that in order to find today’s winners, you want to look at what stocks have done well in the past ten years or so. We invest in proven winners, meaning stocks that have already shown consistent growth in both the stock price and the earnings over the past ten years or so.
Gregg Early: So these are long–term winners. They’re not the up and comers, as it were. You’re really looking at companies that have historical track records.
Stephen Grant: Yes, but we don’t invest so much. We have found that the sweet spot is the mid–cap stocks. These are funds that have already shown that they have a strong product line with a great management teams that have already done well consistently over the past decade, and yet they're small enough that they still have plenty of room to grow.
Gregg Early: I’ve heard from other managers that this seems to be an especially good kind of market for mid–caps as well, because they have more leverage than some of the larger–cap companies, and yet they have a little bit more safety than some of the small–cap companies in this kind of market.
Stephen Grant: Yes, I think that’s very true.