The Promise of Value Versus the Allure of Growth

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Investors, especially those with limited experience, are declaring that value is dead. Those who act on that belief will suffer at the hands of Mr. Market.

If one’s investment experience spans the last 10 years, who can blame them? Since 2010, growth stocks have outperformed value stocks, on average, by 6.11% a year.

If one’s experience runs deeper, or they appreciate history, they have a different perspective. Over the last 100 years, including the last 10, value has outperformed growth by 3.19% a year.

So, is value dead or does it offer incredible opportunities versus growth?

What are value and growth?

Value stocks can be defined in many different ways. The basic premise, however, is the inclusion of stocks trading at a low price relative to their fundamentals; low price-to-earnings, low price-to-book, low price-to-sales, etc. The benefit of buying value stocks is the expectation that prices return to fair value. Quite often, the return benefits from above-market dividends. Equally important, buying a discounted asset reduces your risk.