Amazon’s Lessons for Growth Investors; A New Smart-Beta Growth Strategy
Growth stocks have been outperforming their value counterparts and investors can look at Amazon as an example for why this happened. Meanwhile, new research on a smart-beta-growth strategy looks at the theoretical foundations surrounding traditional growth indices.
In a note to clients, Strategas Research Partners pointed out that “returns stemming from growth investment strategies have reached a point where they could start to underperform.” This could open the door to value investment strategies. According to the report, “68 percent of active U.S. large cap value managers outperformed their respective benchmark during the first half of 2017, the best among U.S. active managers.”
Although value stocks tend to be less expensive in proportion to their earnings, “the performance of U.S. growth stocks has been almost three times better than that of value stocks in the past 10 years.” Investors are choosing companies with rapid earnings or price growth, “meanwhile, stocks have become expensive in terms of their price-to-earnings ratios as investors pay more money for meager profit growth.”