Parag Parikh was known
as a great proponent of value investing and made quite a name as a disciple of
Warren Buffet.
He wrote two books ‘Stocks
to Riches’, and ‘Value Investing and Behavioral Finance’. Both books made a
milestone in imparting knowledge of value investing to Indian investing
community.
He was also chairman of
PPFASL. May 2015 saw his sad demise by a car accident in USA. He was there to
attend the annual shareholder meeting of Bercksihre Hathaway, the holding company
of Warren Buffet.
He will be remembered
for decades to come by people like us who admired the teachings he left behind.
Key Words: Growth Stocks vs. Value Stocks India, Growth Stocks Investing India, Demystifying Growth Stock Investing India, Value Investing Indian Context
Here are some of the
gems from Parag Parikh’s book Value Investing and Behavioral Finance. The views
on so-called “Growth Stocks” are very interesting
Please note this is not complete excerpts, but only relating to growth stocks.
- Seasonal investors chase the
fancy of the markets in the name of growth stocks, and call themselves
growth investors.
- Growth stocks investing is
based on hunches, dreams, illusions or popular opinion. They are better
termed as ‘dream stocks’.
- Growth stocks investing is more
of a philosophy of buying what is popular.
- When one can not justify the
high valuation of a stock one would argur\e that is is a growth stock and
hence expensive.
- For any stock to be a growth
stock it has first to be value stock, value and growth are inseparable.
- The concept of growth stock is
a product of bull market. It dies when the bear market sets in. Bear
markets create value.
- The term ‘growth stock’ is meaningless since ‘growth stocks’ can be identified only in retrospection; it is merely stock that went up.
- When a stock becomes a fancy
and fad in the market, it is chased by one and all. The sharp rise in the
stock price makes it growth stock. Before the rise how many would call it
a growth stock? It is only when the price move very fast it is evident
that it has found fancy and is thus termed as a growth stock.
- It is the value of mastery that
excites investors. It is the lure of the new and the unknown that
fascinates the investors. Investors are always looking at something new,
as they believe that novelty can fetch them more money. This novelty
becomes a fancy when more and more investors chase it. This mixes with
behavioural biases. Thus, a fad and fancy start quoting at fancy prices.
This is termed as growth stock as there is no available explanation to
justify the steep rise in price.
- Growth investing is investing
in new ideas, new technology, new sectors, new initial public offerings,
new additions to the indices, new fad and fancies etc.
- Value investing is knowledge
and growth investing is mystery.
There are a lot more
gems from India's own value investing veteran in his both books. We will update
more later on.
We have done an article on one of his interviews, you may check it out on below link,
http://www.proinvestorindia.com/2016/09/investing-lessons-from-indian-value_16.html