Financial Planning

Investment Styles

Investment Styles

Within the world of investing there are a number of schools of thought or styles that managers tend to follow. This article will look at the most common manager styles, along with the strengths and weaknesses of each.

Value Investing

The value manager attempts to determine the intrinsic worth of a company and then buys it when it is trading well below that value. They will use a variety of tools to measure this worth, paying special attention to strategic indicators they believe the market is ignoring. Warren Buffet is perhaps the most successful (and certainly the most famous!) value investor of all time. He recommends that the most important things to look at are companies that are hard to replicate, have strong management teams, little to no debt and can weather all types of economic cycles. As an added bonus, the company should be involved in a business that is currently out of favour with the wider market, leaving it underpriced.

When talking to a value investor you will hear them using buzz words like “price to earnings”, “price to book value” and “positive cash flow”. Value mangers try to buy companies that are trading below the market average in each of these assorted metrics and sell them when they reach above market levels.
Classic examples of companies that fall into this category include: banks, insurance companies, utilities, railways and dominant brand names in consumer goods (think Coca-Cola and Dairy Queen).

This style is typically most effective when the markets are struggling through a downcycle, the economy is weak, or we are coming out of a market downturn. It tends to struggle as a bull market grows longer or the economy is growing very rapidly.

Growth Investing

Growth managers are near opposite of value managers. Growth investors are seeking the “next big thing” and want to get in early. This typically means the investor is looking for companies that make relatively little or no profits but are early entrants or market distruptors and therefore dominate new parts of the economy. Current examples would be companies like Netflix and Amazon, as well as many start-ups and industry pioneers.

The objective of a growth manger is picking companies that will continue to grow at very high rates. The risks tend to be higher because the stocks typically trade at a high premium to the market and if significant returns don’t meet the market’s expectations, the stock price can fall very quickly and dramatically. Think of Blackberry, the creator of the first smart phones.

Interestingly, many of today’s value companies were at one time major growth stories. For example, Walmart was once a major growth stock but today is viewed as a value story. Apple is a more recent example of this same trend. It is worth noting that when a stock moves from being a growth to a value categorization, the price can often experience significant declines until the market adjusts to the new reality.

Growth at a Reasonable Price (GARP)

GARP managers try to find a balance of both the value and growth narratives. Like value managers, GARP focuses on cash flow, profitability and a competitive advantage as key metrics in deciding if a stock is worth buying. And like growth managers, a GARP investor wants their companies to be growing a rate that is better than average. In short, these managers seek stocks that are a blend of both value and growth. As a result, this type of investor is willing to pay a premium to market price for their companies while avoiding both speculative growth and mature industry players.

Current examples of GARP type companies would be Google, Facebook and Mastercard, as well as many of the most successful smaller to medium sized companies in the stock market.

This type of manager tends to outperform during prolonged bull markets but can drop more quickly when the market gets bearish. In addition to the above average volatility, a GARP manager needs to be careful about buying either too early or too late in the company’s life cycle. If a manager is too early to purchase, the company may not have sufficiently solidified its market share or price advantage over competitors. The company then get caught in a competitive squeeze and see its profits drop. If the manager is too late she may find herself owning a stock where the company is no longer growing at its historical pace, and the market will discount the company’s future growth potential.

Momentum Traders

This style looks at market trends to determine which sectors are in favour and which are out of favour, then only invests in the in favour sectors. For this style to be successful the manager needs to be ahead of the market curve and entering a sector just as it is starting to gain attention and attract new investors. As an analogy think of a surfer hoping to ride a large wave.

This strategy is most commonly found in hedge funds as the manager must be given great latitude and discretion in his trades. As a result, both the potential risks and returns (and corresponding losses) can be much greater than the market average. Fundamental analysis such as profitability, cash flow, market share, book value and the like will have little relationship to the price of the stocks. Instead, the manager attempts to get sector and specific stock picks right, and combines it with exceptionally good market timing.

Two very recent examples of momentum trades were Bitcoin in 2017-2018 and Canadian marijuana stocks in 2018-2019. Investors who got in early enough on each of these stories, AND also sold at the right time could make dramatic profits. The danger was buying in at the tail end of a boom cycle and then being caught when the market finally goes bust.


Clearly one can have a number of investment styles or biases when picking stocks. The key to choosing the right style will depend on personal tolerances for risk, as well as an expected rate of return. Finally, the manager needs to have the disciple and skill to properly evaluate the companies they might invest in both when they buy, and when they sell.

Start the conversation


Like you, we’re selective about the long-term relationships in which we engage.

We’re looking for aspirational clients who require the whole spectrum of financial services because managing the whole is how we’re able to deliver unbeatable value – it’s our “secret sauce”.

If this describes you, let’s set up a meeting and
get to know each other.

Sign up for the Portfolio Minute newsletter

Are we a good fit?

We’re looking for aspirational clients who require the whole spectrum of financial services because managing the whole is how we’re able to deliver unbeatable value – it’s our “secret sauce.”If this describes you, let’s set up a meeting andget to know each other.

Full quote:

I just want to say we have been with your team since 1993, and we have never had any bad advice. The investments you set up for us during this time has paid for university education for our two granddaughters and provided a significant monthly income for us to augment our pensions.

We are with you for the long run and are not going anywhere. Jeremy has told us that at these times the numbers tend to scare you, but you haven’t really lost anything if you don’t panic and sell.

Ken M, Calgary

With CH Financial since 1993

Full quote:

When I became a client of CHF it was a real game-changer as I was going through a very difficult time both professionally and personally.

I went through a divorce and the loss of a job and a parent, all within a 12-month period. While it was very tough to deal with at the time, I was reassured by the fact that the team at CHF had my back and really cared about me and what I was going through.

Looking back now, I’m not sure how I would have managed without the support of the CHF family.

Jeremy and his team were there every step of the way to help me navigate my way through the complexities of a divorce and inheritance. They got me back on track both financially, as well as emotionally.

I have now been a client of CHF for over 10 years and thanks to their expertise, I know that my family will be well taken care of for many years to come. I am now in a position where I don’t need to worry about money thanks to a solid financial plan.

I would highly recommend the CHF team to others going through life-changing and difficult situations as your financial partner.

Linda, Victoria

Full quote:

As an investment industry professional, I am constantly on the go and maximizing my peak career earning years in my 40s. With travel and work commitments I am very limited for time to spend with family and do the things I love to do and chose CH Financial to allow me more freedom and lifestyle balance.

Being in the investment industry my whole career and an extremely busy professional, I know I could probably do a good job at managing my money as I work in the industry after all while I rely on and trust the CH Financial team that they will take care of the details, both growing my assets as well as taking care of every aspect of my financial situation, including my tax, investments and insurance, they simply take away the stress of having to worry about it all and help me to navigate the complexities for me so it all meshes together and importantly saves me valuable time and headaches.

At the end of the day, the reality is I truly value my time and the opportunity cost of my time and would rather hire the best in the industry so ultimately my wife and I can do the things that we love to do, have more leisure time, relax and enjoy spending time in the great outdoors, exploring new countries, hiking in the mountains and volunteer work.

Since engaging CHF more than 5 years ago we have enjoyed significant growth in our investments but more importantly, we have peace of mind and sleep much better at night knowing the team at CHF has our financial back and anything financial they will take care of for us.

I would have absolutely no hesitation in recommending the team at CHF to other career-focused busy professionals who really value their time and lifestyle balance.

Kevin & Sharron, Calgary

Financial industry professionals

Full quote:

Prior to joining CH Financial as a client, I had been partially managing our investments and using a bank-owned broker for many years, with moderate success. When we became clients of CHF, I quickly realized how little I knew about the complexities of managing investments and the importance of seeking out the best specialists in the industry to assist with my family’s full financial picture.

Brian and the team at CHF encouraged us to take an introspective look at our assets and expenditures and even helped us implement a comprehensive budget. The team really stepped up to take care of all aspects of our financial picture, including portfolio design, CH Financial introduced us to a lawyer who took care of everything for us, estate planning and tax, while helping us simplify our financial affairs.

Being of the sandwich generation my wife and I spend considerable time caring for our surviving parents and our grandkids, so

freeing up valuable time is essential to allow us to do the things we love to do. The team at CHF takes care of the details and today my wife and I enjoy a comfortable, stress-free financial situation.

Over the years as a client of CHF, both our portfolio and wealth has grown exponentially, more than we could have ever imagined. Now that we are both happily retired, having the CHF team in our corner helps us to sleep better at night knowing that our somewhat complex financial puzzle is being looked after by a team of people that really care, as opposed to being treated like a number by a big bank.

I would have no hesitation in recommending the CHF team to others looking for a superior financial home in Calgary and a safe place to invest your hard-earned money.

Ian C, Calgary

Comfortably retired thanks to CH Financial