Growth Stocks May be Outperforming, But Value Will Come Back

Since the financial crisis, growth stocks have beaten value but, over the long-term, value will have its day in the sun. This according to a recent article in the Financial Post. “Over the long term, buying value and ignoring the shiny, well-liked stocks has paid off,” the article says, but the reversal in performance over the last decade has seen return-hungry investors gravitating toward dividend-payers and tech stocks and the “cheaper” parts of the market have languished. “Only once has the valuation and performance lag between value and growth been wider,” it asserts (during the 1990s tech boom), after which […]

Picking Stocks is Hard, But Picking Growth Might Be Harder

In a recent article for Bloomberg, columnist Nir Kaissar discusses the ongoing debate regarding the challenge of stock picking. He cites a study conducted by University of Arizona professor Hendrick Bessembinder that found, for the period between 1926 and 2016, “only 4 percent of stocks accounted for all the wealth created,” and “50 of those stocks accounted for 40 percent of that wealth.” That basket of 50, writes Kaissar, resembled a growth stock portfolio (and included four of the five FANG stocks), and while 7 of those 50 no longer trade, the other 43 “fetch prices befitting the most sought-after […]

Growth or Value: Who’s Driving the Bus?

Conventional wisdom suggests that value reigns at the beginning of bull markets and growth overtakes as the bull market progresses. But there is data that suggests another relationship: That is, that financials and tech play a dominant role in the respective strength of growth and value, this according to research by Standard & Poor’s Managing Director of US Equity Strategy, Sam Stovall. The correlation of monthly percentage changes in both the growth/value and tech/financials relative strengths generates a coefficient of .73 (1.0 would mean that they track perfectly). Further, correlation between monthly price changes in the ten S&P 500 sectors […]