Tale of two styles : growth versus value : an honors thesis (HONRS 499)

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Duquaine, Mark P.
Rathinasamy, Rathin S.
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Thesis (B.?.)
Honors College
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The goal of every investor is the same: make money. From the time one is born until the day one dies, everyday in between is spent in some capacity undertaking the feat of acquiring wealth! While there are thousands of means for acquiring wealth, the longest lasting method for quickly accelerating one's wealth position has been through the use of the stock market. The mainstay of American investing has been undertaken heavily in one particular exchange, The New York Stock Exchange. The New York Stock Exchange, or the NYSE, was created in 1792 when twenty-four stockbrokers and mercantilists signed the Buttonwood Agreement in an effort to consolidate and organize the exchange of securities.1While the exchange still exists and today is now host to over 3,700 issues from more than 3,000 companies, the NYSE does not now nor has it ever given any indication of what company will outperform the market on any given day. Therefore, an astute investor must not only master the fundamentals of investments in order to understand why the market works and moves in the way it does, but also learn the techniques involved in forecasting future market trends.This paper will provide the education needed to understand the two basic, but very important styles of investing used in today's trading environment. The two basic styles of investing used today are: Growth Investing and Value Investing. The style's name is indicative of the type of stock the style seeks to invest. Growth investors seek to find stocks that are significantly outperforming the market, buy them, and ride the wave of their profits. Value investors use the method in which they take the "bargain hunter" approach in hopes of finding a company undervalued by the market, buy it, and then reap the profits when the market realizes its mistake.While the process of actually investing using the growth or value style is more complicated then the previous statements suggest, the principles and fundamentals of the style must be understood in order to make an informed decision when investing in the market. The first section will develop the history, fundamentals, and research used to understand the growth style, while the second section will do so for the value style. The third section will examine the historical trends of growth and value investing and which method has outperformed the other over time. Finally, the fourth section will examine Wal-Mart Stores, Inc. This section will apply the knowledge from the previous three sections in order to show how an investor may decide whether or not the growth or value style would apply to Wal-Mart Stores, Inc.1 "Did You Know?" NYSE Online. http://www.nyse.com/about/about.html (2 April 2003).