Warren Buffett On Value Vs. Growth
Billionaire investor Warren Buffett has been highly critical of these styles. He has commented that investment ratios such as P/E ratio are no guide to value. In an excerpt from his 2000 letter to shareholders he wrote the following:
Market commentators and investment managers who glibly refer to growth and value styles as contrasting approaches to investment are displaying their ignorance, not their sophistication.
This is because Buffett believes the most important ratio is price/intrinsic value, and intrinsic value incorporates the growth rate of the business. However, this is a less practical measure than price/earnings since intrinsic value depends on the estimate of future cash flows, and can therefore be highly subjective.
Read more about this topic: Value Vs Growth Investing
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