Value Stocks Versus Growth Stocks In 2017
Value vs. Growth Stocks An Impressive Flip in Performance By Dr. Van Tharp Trading Education Institute
Back in April, I shared a short Jeremy Grantham video with you. Grantham and his eponymous firm GMO are firmly in the value investment style camp. Grantham highlighted some of his long-term valuation thinking in that video.
I just read GMO’s six page June edition of “Global Equity Insights” and it appears that Grantham hires some pretty deep talent. Ph.D. physicist Neil Constable and a Rick Friedman (Wharton plus Harvard pedigree) wrote a data heavy yet insightful research piece. Let me share my takeaways and I why I think their observations are useful for us.
The Style Switcheroo
Understanding the culture and background of the authors or their firm is always helpful whenever you read a research piece. GMO is unabashedly a value firm and with $77 billion under management, they are going to “talk their own book” in their research. With that said, they still give us some very useful information. Let’s dig in.
In 2016 value stocks kicked some behind. They outperformed growth stocks by a wide margin:
Note that the authors didn’t use some ginned-up measurement, they use two well established indexes — the Russell 3000 Value index and the Russell 3000 Growth index.
Value outperformed growth significantly in its magnitude and its persistence in 2016. Those were halcyon days for value investors like the folks at GMO.
Skipping ahead to 2017, we find that the game has been flipped on its head. This next chart graphs U.S. value, US growth, EAFE (Europe, Australasia and Far East), and emerging markets:
The authors note, “Style shifts are common, but the magnitude of the change from late 2016 to early 2017 has been particularly dramatic.” That’s almost an understatement but they go on to say that value’s 2016 outperformance and 2017 underperformance are both “1 out of 20” type of moves.
To explain the admittedly large deviation in the two styles, they turned to sector analysis. Here’s a cool graphic that you’re free to study at length:
I’ll give you the short version of the graphs — Info Tech has been crushing it. Big names that you already know have been vast outperformers: FB, AMZN, AAPL, NFLX, GOOGL. Also, semiconductor chip names like NVDA and MU have fueled the Growth column with the help of health care and consumer discretionary names.
The good folks at GMO remind us that the big switch to growth outperformance in 2017 starts to make value look good again. They wrote the piece before the two-day Tech Wreck that we covered last week so I give them kudos. Based on the recovery of the big names from the Tech Wreck, however, my expectation is that those big stocks will once again find a way to outperform over the summer as the market grinds higher.
Stock Investing Trading
Investing and trading stocks has its risks and rewards. Learn stock investing trading and most important, how to manage market risk and you will be a successful investor trader in the long-term. Your profits will simply follow your success.
Start big or small and grow bigger over time. Successful investing and trading starts with your continous education, setting dated investment trading goals, creating implementing investing trading plans, and executing those plans. In the long-term you will be successful and the money will follow.
Below are some links to information and services that will help you to be a successful stock investor and trader.
Invest2Success Investment Advisory Stock Picks
Free Trial - Receive daily low-risk high-reward SP500 NYSE Nasdaq buy-long and short-sell stock picks that are experiencing strong increasing and decreasing earnings, that include buy sell entry, stop-loss, take profit area price targets, and trade management information to your email inbox.
Stock Option Forex Futures Training Seminars Webinars Workshops
Click Here For The Complete 2017 Schedule
Professional investors traders teaching successful low-risk high-reward
trade strategies. Power profit secrets for stocks, options, forex, futures
investing trading success. Or avail of Home Study Courses and or
Trading Softwares available to improve your investment returns.