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Now Is The Time For Value to Outperform Growth

FYI: We believe that now is a very attractive time to invest in value strategies. In similar times in the past, value investors achieved both strong absolute returns and robust relative performance versus the broad market indexes. Let’s explore what history can teach us about what is to come.

S&P 500 Growth (TR) 10 Years
Launch Date: May 30, 1992
2,612.30 7.84 %▲

S&P 500 Value (TR) 10 Years
Launch Date: May 30, 1992
3,764.24 5.01 %▲


  • may it be so!
  • edited February 2016
    My well diversified, income generating, portfolio has a value tilt within equities with about 45% invested in value stocks, 30% core stocks and 25% growth stocks according to Morningstar's Instant Xray analysis. Interestingly, my portfolio is down year-to-date about 3.5% while the widely followed S&P 500 Index is down about 8.0%. I attribute this in part to its value tilt, sector positioning and a larger than normal allocation to cash along with the fixed income side having a duration of 3.6 years where a widely held bond index fund, that I follow, is carrying a duration of 5.3 years. My three best performing hybrid type funds year-to-date are PGBAX (-2.0%), FRINX (-2.2%) and CAIBX (-2.5%). My tactical allocation fund BAICX is down -3.1% year-to-date. My three best performing equity funds are PGUAX (+1.9%), SVAAX (+1.5%) and TOLLX (-1.2%).

    It seems diverification, active management and good fund selection is working, for me, as a sixty/forty (stock/bond) portfolio made up of two index funds, that I follow, is down about 3.8%. Interestingly, my engineer budy who I have written about in a few other previous post reduced his allocation to stocks and raised his allocation to both bonds and cash this past month. Seems, he has been, is now being, active and making tactical shifts moving to an allocation of about 20% cash, 40% bonds, 40% stocks from from an allocation of about 10% cash, 30% bonds and 60% stocks.

    I wonder what others might also be doing; and, how they are fairing in the midst of this selling stampede?
  • @Old_Skeet: You did a bit better than me, I was down 4%, but that was only because I have 35% in muni bonds which I hold till first call or maturity, whichever comes first. Equity portion was -9%, best being utilities, staples and a couple of stocks positive for the year. One of my largest holdings, VDIGX behaved like I expected it to, down considerably less than the S + P. My large cap growth holdings however did some damage, along with hc. Holding on for the ride.
  • Yeah, bonds and value tilt do help: DSENX and PONDX 50-50 (which I have not yet achieved) is down a little less than 3%. GLRBX down over 4%, AOR around -3%, AOM -2.67%.
  • Not taking a position for or against value because it does not matter for a diversified portfolio but one has to be careful about metrics that suggest something will overperform next. The worst thing one can do is switch when such articles come out.

    First, the authors of the paper are talking their book so to speak. "Our strategies sucked recently but that was because of a few stocks in growth and our statistics show value wins over growth." Ok.

    There is a slight edge to value over growth over large periods adjusted for volatility as some studies I believe have shown but that says nothing about any particular cycle and the absolute performance as @Ted's statistic above shows.

    Value stocks have lower volatility and look better when markets head down because they don't tend to go down as much. But switching based on this would be absolutely the wrong thing to do because in a turnaround, the more volatile growth stocks shoot past value.

    So, based on articles like this and the drawdown in growth stocks recently, if one were to sell growth and buy value, they would be locking in deeper losses from a higher volatility asset and getting into lower potential gains from a lower volatility asset. Bad for the portfolio.

    I am sure most here probably don't do such portfolio changes, just raising that caution in case someone is thinking of doing so.
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