Just as there are different schools of architecture there are three great and distinct serious stock market investment religions: value investing, growth investing and momentum investing.

I suppose a forth one is agnostic, which tends to chose the style all depending on the current stock market cycle.

Day trading in shares is not an investment theorem as this is considered a speculative activity with marginal long-term results.

Growth-stock investors argue that you should want to own shares in growing companies for the long run, as their earnings and dividends are on the up and, despite occasional setbacks in some years, they outperform � ultimately � everything else.

The key then is properly identifying such companies more so than being overly concerned about how expensive they are.

By expensive we mean their earnings per share as compared to the current stock price. This is called the price-to-earnings (P/E) ratio.

The higher a P/E ratio, the more expensive a stock is valued in the market.

US academics have proved that if you had perfect foresight and bought shares of companies with the fastest earnings growth � regardless of valuations � over the long run you would outperform the S&P 500 (a broad US stock index) by 11 percentage points per year, which is a huge amount.

The problem, obviously, is that nobody has perfect foresight, as identifying growth ex-ante is very difficult.

By contrast, value investors want to own shares that are cheap � not only on an absolute basis, but also as compared to others trading on the same stock exchange.

It�s like an informed consumer going to the supermarket looking for items on sale that are truly bargains.

By investing in undervalued shares, a value investor so creates for him or herself a margin of safety in case something goes wrong, like a sudden market correction or a change in the economic outlook.

Value investors look for firms that can be purchased below their intrinsic fair value.

Value investors never fall in love with their stocks; when they are discovered and move up in price, they are sold, purely on the basis that they are no longer cheap.

Value investors are often called �contrarians� because they invest in companies that are not currently in vogue.

Momentum investors are just the opposite.

They look for shares that are in fashion and flavour of the times.

They like to buy shares that are "trending up" now and so extrapolating the past into the future.

Momentum investors are not concerned much with low P/Es or high dividends or what the business outlook is. They are most concerned in what is working just now and to ride the trend.

The trend is your friend, they say, and in a true bull market this works well.

�A trend is a trend is a trend,
But the question is , will it bend?
Will it alter its course
Through some unforeseen force
And so come to a premature end?�

Sir Alec Cairncross, Chief Economic Advisor to the British Government in the 1960s.

The agnostic investor believes everything in the investments business, as well as in life, is temporary, with �This too shall pass� being their mantra.

They believe there are fashion swings between the different styles, influenced by the times of that era.

They think they can correctly identify the current style, change their ways in time and not be left behind.

This self-acclaimed intelligent investor thinks he can capitalise on the mood swings of an era, adapt and so excel.

The hardcore growth and value investors claim that this switching back and forth is a loser�s game.

It is true that the growth-stock investing style has worked very well for many professional investors over many decades.

The trade-off however is five fold:

1. Growth stocks in developed countries are usually trading at a premium price as compared to the average stock in that market.
2. Growth stocks in developed markets pay no or only a miniscule yearly cash dividend, so holding on to them gives you no current income.
3. Identifying true growth companies � for the long run � is difficult as many fall from grace.
4. Growth stocks are usually smaller and have less market liquidity, although this is only most important to larger institutional investors.
5. Growth stocks in developed country stock markets are often more price-volatile and so entail more risk.

This, therefore, requires a full-time commitment of regular attention, checking, discovery and monitoring, along with the further limitation of no or little annual dividends, higher volatility and lower average daily trading volume.

Here is the punch line on why the Thai stock market offers unique opportunities:

The beauty of the Thai stock exchange, as an investor, is that you can be both a value and a growth investor at the same time with the trades-offs are virtually eliminated.

Some believe this is too good to be true, but consider these facts:

1. Thai small-capitalised (cap) companies whose earnings often grow faster than large-cap SET stocks, almost all trade at a discount p/e, not a premium, as compared to the larger cap SET stocks.
2. Thai small-cap stocks listed on the SET and on the secondary smaller cap exchange called MAI (Market for Alternative Investing) almost all pay a higher cash annual dividend, as compared to their large-cap cousins. The average annual dividend yield on the Thai SET is currently around 4%, but many of these smaller growth companies pay yearly dividends in the rage of 5-8%.
3. Small-cap Thai shares have far less average daily trading volume, but if you are an individual investor, then this is hardly the same handicap that an institution would have. And, unlike the nature of a consumer product or real estate, you can dribble-sell and accumulate-buy shares.
4. The SET small-cap stocks most often have lower-than-average SET market Betas, meaning historically they have been less volatile then the large-cap stocks.

�The SET index is highly influenced by a number of volatile large-cap stocks. In contrast to the developed countries the large cap stocks are among the most volatile.�
Mr Montree, Chief Executive of Kim Eng, Thailand�s largest broker dealer by market share.

Thailand has a number of profitable and leading small-cap companies in important industries and some with years of good earnings and dividends.

In many ways these represent the real Thailand and they make up some two-thirds of Thai economic activity.

The problem is that, for the most part, the transaction-orientated local brokerage community does not focus on long term investing because this does not promote broker commissions.

Further, many broker reports are geared to the institutions; the very larger investors who are and must be share-liquidity obsessed.

Identifying, analysing and knowing about these smaller growth companies therefore present the real challenge.

A challenge once addressed, along with using a fully diversified portfolio approach, has resulted in a superb investment mix of value and growth, along with high dividends all at once.

This has been so for many years, and looks likely to continue to be a true wealth creating experience.

Paul A. Renaud.
www.thaistocks.com