Adding my two cents here.
Pure value investing (like buying stocks at a discount to the net cash/asset value of company) does not rings a bell inside my bell, at least in Indian context. With 7-10% inflation, a company which is growing less that this is automatically losing invested money, hence deserves a discount to its asset. Also as we know Indian stock market is a virtual minefield (with countless folks doing sister party transaction, and promoter taking away shareholders money) hence an extra margin of safety is needed for this. The second aspect makes pure value investing a as-much-as-you can avoid in indian context.
Growth stocks with high ROE/ROCE, and good sales/np growth, and good visibility in future growth potential doesn’t suffer from above two malaise, and hence they deserves higher pe multiple.
If the same stocks have solid high cash flow, and working in a secular industry like consumption play (like pidilite, asian paints, berger paints, nestle etc…), and having high dividend payout rate, they deserves still higher pe of ~30 that they are having. This comes straight from DCF, nothing new here. Investing in such stocks are an assured way for beating sensex.
There is a better way to beats sensex in a big big margin (or finding multibaggers), the approach valuepickr seniors mostly follow. The trick is to do growth-at-reasonable-price (GRP) style value investing in high ROE/ROCE, low DE, good management, preferably lesser known small/mid cap with promoter stake touching 75% range (ex. Mayur, Ajanta, Kaveri, Atul auto, Astral). Plus use of collaborative effort to do ground study on what exactly is going on in the field.
These type of stocks gives you multiple advantages. Because of small capitalization, and higher promoter holding, big guys can’t even enter it, and hence pe remains low for longer time. But increase in market cap, gives big guys a scope to enter it, resulting in a very good pe expansion. You get double benefit of growth + pe expansion, and than only get multibaggers.** The trick I am learning these days is not to get paranoid/panicked, when stock price of skyrockets in short time, and pe valuation breaches historical levels, to reach new level**. This needs a huge mental efforts, which I am yet to master. the struggle is still on.
The secret for making huge money is to hold tight in the face of pe expansion. If I would have done that I am sure I would have gained at least double the gain what I get today.