EPS x P/E. Thus, the lower the P/E of a stock, the more attractive it is. This was in the early '80s.
In the late '80s dawned the realisation that EPS growth is an important part of the equation.
Thus came the framework of PEG i.e. P/E to Growth in EPS. The lower the PEG of a stock, the more attractive it is.
Some institutional investors called it GARP or Growth At a Reasonable Price.
Then in the '90s, I was exposed to the thinking of Warren Buffett. He emphasised the role of quality in investing with (now common) metrics like RoE (Return on Equity). He has famously said, «It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.» Some in the market began to call this style of investing QGARP or Quality Growth At Reasonable Price.
In QGARP, the focus was mainly on the business quality.
I deciphered that quality of management is equally important, if not more. Also important is the longevity of both, quality and earnings growth. Thus, around 2010, I came up with my own investment philosophy QGLP — Quality, Growth, and Longevity at a reasonable Price.
Currently, the Indian stock market is practising QGLP or its variants.
So, how does one gain a cutting edge in this situation?
I see two ways: 1) Use patience for the power of compounding to fully play out, and 2) Use investment frameworks (IFs). To reap the full benefits of any investment philosophy, it must be overlaid with several time-tested IFs. Over time, I have developed an array of IFs, under each of Q, G, L and P.
For instance, to ascertain the Quality of Business, one of the best frameworks is Porter's Five Forces.