INSUBCONTINENT EXCLUSIVE:
NEW DELHI: Information is key to winning in value investing, says Stephen Penman, an authority in value investing.
The professor of
security analysis at Columbia University says getting enough information to understand a business and how that is going to translate into a
financial statement is key.
Information reduces uncertainty and risk in investing
Hence, the crux is to get information
The target of the information and value investing is to discover a price that is different from value, Penman said in a interview with
This is active investing, which is different from buying a passive index fund, where you buy a basket of curious stocks and you are exposed
think you will buy good companies
But you do not buy good companies, because good companies can be bad buys
There are firms that trade in low multiples and low price to earnings (P/E) ratios and price to book (P/B) ratios, for example, which
earnings ratio is based on growth
Buying a price multiple is buying growth and you need to be beware of the risk
differentiate between value investing and growth investing, Penman said both are misnomers
All investing in my mind is value investing
risks, investing risks.
He said the primary risk of investing is the risk of paying too much: overpaying for an investment is the key risk
