Bridging Traditional Value Investing and Growth: A Quantitative Framework for Superior Investment Strategy
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Authors
Moorman, Max
Maraqa, Ramzy
Issue Date
2025-04-25
Type
Other
Language
en_US
Keywords
Scholarship Sewanee 2025 , University of the South, Finance, Presentation, 410 comp.
Alternative Title
Abstract
This paper presents an innovative investment framework that merges traditional value investing principles with advanced, growth-oriented valuation metrics to deliver superior short-term, risk-adjusted returns. Addressing the increasing disconnect between classical valuation models and the realities of today’s dynamic equity markets, this approach integrates foundational ratios such as P/E, P/B, and ROE with modern tools including PEG, Growth-Adjusted P/E (GA-P/E), EV/EBITDA, EV/FCF, and asset turnover. This hybrid methodology provides a more holistic lens to identify undervalued yet high-potential equities, particularly in sectors driven by rapid innovation and reinvestment.
The model is tested through a diversified five-stock portfolio, equally weighted across the technology, consumer goods, healthcare, and energy sectors. Using historical data from Yahoo Finance and analytical tools grounded in the Capital Asset Pricing Model (CAPM) and Modern Portfolio Theory (MPT), the portfolio is evaluated for alpha generation, beta exposure, volatility, and Sharpe ratio. Importantly, stock selection is aligned with macroeconomic indicators—such as GDP growth, inflation trajectories, and interest rate trends—to ensure consistency with current market conditions and forward-looking positioning.
Empirical results indicate that this dual-metric strategy consistently outperforms a traditional value-only approach in both total returns and risk-adjusted performance. Notably, companies like Microsoft, Nvidia, and ExxonMobil exemplify strong alignment with the integrated valuation model, validating the enhanced predictive power of growth-adjusted metrics in capturing future returns. Furthermore, the portfolio maintains robust diversification and downside protection, reinforcing the strategy’s resilience under varied market conditions.
In conclusion, this research affirms that traditional value investing, when enhanced with forward-looking growth indicators and informed by macroeconomic context, can evolve into a more agile and effective philosophy for modern portfolio construction. This framework offers investors a refined toolkit to navigate today’s complex markets while preserving the foundational discipline that has long defined successful equity investing.
Description
Citation
Publisher
University of the South