De los 41, a los 53 años de edad
2. Los viajes misioneros: visión general
'2/74(
In the bottom-up investment approach, growth managers will focus on current and future earnings of individual companies, specifically earnings per share (EPS). Growth managers are looking for “earnings momentum” and they will pay more for companies if they feel the company’s growth potential warrants the higher price. Stocks in this type of portfolio usually have a lower dividend yield, or provide no dividend at all, and managers may turn over the securities in the portfolio more often.
2ISK
s If EPS falters, it can cause large percentage price declines.
s Reported EPS, above or below analysts’ expectations, produces high portfolio volatility.
s These types of securities are highly vulnerable to market cycles.
$"/"%*"/4&$63*5*&4$0634&r70-6.& 16s14
© CSI GLOBAL EDUCATION INC. (2010) 6ALUATION
s High Price-Earnings Ratios
s High Price/Book Value
s High Price/Cash Flow
Long-term total return is gathered mostly through capital appreciation. Growth managers are usually not concerned with quarterly portfolio fluctuations. They can outperform in up markets and hope to survive down markets. Clients must be more risk tolerant (i.e., they do not panic in down markets) and have long-term investment horizons.
The growth manager’s challenge is to avoid paying too much. Often managers try to buy stocks at P-E ratios that are less than the stock’s expected earnings growth rate. Growth investing is a matter of expectations and growth stocks seldom seem cheap today. But, if the company continues to grow as expected, then today’s stock price will represent a good investment a year or two from now.
Some managers who use the growth style are able to outperform the market in the short term. They identify companies with competitive advantages, such as new technology or original ideas, and that hold greater promise for market appreciation than established or less innovative companies.
The growth style works best in rising markets, however, as stocks with above-average prices are more vulnerable in bear markets. The style is appropriate for investors who are aggressive or who favour momentum investing, and who enjoy making spectacular gains in rising markets.
The growth style holds greater potential for capital appreciation because of faster earnings growth. Growth stocks tend to reinvest more of their earnings. However, this style has greater volatility, hence risk, since more of the total return of the portfolio is derived from capital appreciation, rather than dividend income, which tends to be more stable. Also, growth stocks may fall more rapidly than other stocks in a declining market.
Since portfolio turnover tends to be higher, investors in taxable accounts may be liable for increased amounts of capital gains tax every year.
6!,5%
For value investing managers, the focus is on specific stock selection. They are bottom-up stock pickers as well, with a research-intensive approach. Security turnover is typically low, as the manager will wait for a stock’s intrinsic value to be realized. Since a stock is often cheap for a reason (it is out of favour), realizing its intrinsic value can take some time. Out-of-vogue, overlooked, disliked, cheap stocks that investors, institutions and analysts alike have given up on, have quit following and probably don’t own are what the value manager seeks.
2ISK
s Lower annualized standard deviation
s Lower historical beta
6ALUATION
s Low Price-Earnings ratios
s Low Price/Book Value
s Low Price/Cash Flow
s High dividend yield
Over the long term, value investing has produced total returns virtually identical to those of growth investing but with higher current dividend yield and less portfolio volatility. This style tends to perform best in down markets with some participation in up markets.
Because of the lower volatility associated with this style of management, value managers can be used as core managers for low-to-medium market risk tolerant clients with long-term investment horizons. This style of investing requires patience. The patience comes from waiting for the value of the underpriced bargains to be realized by the market.
By screening stocks for cheap fundamentals, and investigating a company’s management,
products or services, and competitive position, managers can buy stocks at discounts that should eventually rise in price. Because turnover in portfolios with a value bias tends to be low, investors incur fewer capital gains. This allows more of the capital to grow inside the fund. Value investing largely ignores short-term market fluctuations.
A value manager’s picks may not be immediately recognized as undervalued by the market. Value investing is more successful in inefficient markets, when stock prices may be out of line with corporate fundamentals, or in a stagnant or declining market, when there is greater emphasis on preserving capital or minimizing short-term losses.
One drawback to the value style of investing is that in efficient stock markets, the price of individual securities tends to reflect all that is known about them. Thus, an individual stock may be trading at a low price for a good reason that does not show up in its financial statements. Because of the focus on “good value,” value managers may also overlook or fail to purchase shares in excellent companies with above-average prospects for earnings growth and share-price appreciation. They may be drawn to companies that are in need of a turnaround to overcome financial or competitive difficulties.
Some value managers avoid some industries, such as high technology and health care, that tend to have high market values. These exclusions steer the value manager’s portfolio away from high growth sectors with a strong potential for capital appreciation. Since value managers have no particular bias in their portfolio with respect to industry sectors, they will not benefit from strong gains in any particular sector.
3%#4/2
Sector rotation applies a top-down investing approach, focusing on analyzing the prospects for the overall economy. Based on that assessment, the managers invest in the industry sectors expected to outperform. These managers typically buy large-cap stocks to maximize their liquidity. They are not as concerned with individual stock characteristics. Their primary focus is to identify the current phase of the economic cycle, the direction the economy is headed in, and the various sectors affected. In other words, industry selection is more important than stock selection, and the manager often tries to identify emerging trends.
$"/"%*"/4&$63*5*&4$0634&r70-6.& 16s16
© CSI GLOBAL EDUCATION INC. (2010)
Risk features include high volatility caused by industry concentration and rotation between industries and greater risk if the manager’s economic scenario is wrong and the favoured industries do not perform as expected.
Over short periods, managers and investors who use sector rotation may significantly underperform the market benchmark. The turnover for a sector rotation–style portfolio also tends to be high. This pushes up trading costs and the expenses charged to the fund. The higher turnover may create problems for taxable accounts, since capital gains are paid on the fund’s frequent trades. Also, the style’s emphasis on industry sectors means that the merits of individual companies get less scrutiny and good individual stocks may be overlooked.
The emphasis on large, liquid companies that lead their particular sector also means that the actual stocks picked may not necessarily represent the performance of the entire sector. Stock- specific circumstances may cause an individual holding to behave very differently from its industry peers.