Palace/Workshop

Value vs Growth Investing

investingvaluationgrowthintrinsic-value

Value vs Growth Investing

Howard Marks' 2021 memo "Something of Value" reframes the old value-versus-growth divide as a false dichotomy. Value investing should not mean "low multiple investing." It means estimating intrinsic value and buying below it. Growth is one component of intrinsic value.

Core Distinction

  • Low valuation metrics can signal cheapness, but can also signal a value trap if future earnings are deteriorating.
  • High growth can justify high valuation if long-term cash flows, competitive advantage, and reinvestment runway are real.
  • No price too high remains the danger zone: even great companies can become poor investments if expectations become excessive.

Marks' conversations with Andrew Marks pushed him to update his older bargain-hunter instincts. The lesson is not that growth always wins; it is that value analysis must include future business quality, not just present statistical cheapness.

Practical Use

Ask:

  • What cash flows can this business produce over time?
  • How durable are its competitive advantages?
  • How much of the value lies in distant future cash flows?
  • What discount rate is appropriate?
  • Does the price already assume perfection?

Sources