Avoiding The Double Whammy: Why We Prefer Value To Growth

June Newsletter | Value investing is about discounting the unpredictable future and valuing what we can assess today. We value the current earnings stream, to the extent that we can assume it will continue for some time, considerably more than we value the future that might eventuate should significant growth occur. For the technically minded, we would use a lower discount-rate on the expectation of a continuance of current earnings and a far higher discount-rate when assessing future growth in earnings. We try to find companies which have a good track record of delivering returns on capital, where the products and services are not under threat or structural decline, where revenues and earnings are likely to grow in line with inflation (price) and population growth (volume) over the medium-term, and where we are not paying a huge multiple for these earnings. To us this is the essence of value investing.