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  Growth Vs. Value Investing (Small-Caps)
Posted Under: Themes
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View from the Observation Deck
 
We update this post on small-capitalization (cap) stocks every now and then so that investors can see which of the two styles (growth or value) are delivering the better results. Click Here to view our last post on this topic.

  • As today’s chart reveals, the S&P SmallCap 600 Pure Growth Index (Pure Growth Index) outperformed the S&P SmallCap 600 Pure Value Index (Pure Value Index) by a significant margin over both the 1-Year and year-to-date (YTD) time frames. 

  • In our last post on this topic, we noted that the Information Technology Sector comprised 19.8% and 6.4% of the Pure Growth and Pure Value Indices, respectively.

On a trailing 12-month basis thru February 23, 2024, the S&P SmallCap 600 Information Technology Index posted a total return of 5.94%. For comparative purposes, the S&P SmallCap 600 Index was up 4.94% on a total return basis over the same period.

The total returns in today’s chart, thru February 23, 2024, were as follows (Pure Growth vs. Pure Value):

  • 15-year average annualized (14.37% vs. 16.73%)
  • 10-year average annualized (7.04% vs. 6.82%)
  • 5-year average annualized (4.38% vs. 9.16%)
  • 3-year average annualized (-3.23 % vs. 9.83%)
  • 1-year (14.86% vs. 3.80%)
  • YTD (2.51% vs. -4.19%)

Takeaway: As today’s chart illustrates, the Pure Growth Index has enjoyed substantially higher total returns than the Pure Value Index over the trailing 12-month and YTD time frames (thru 2/23/24). The last time we posted about this topic, we presented the idea that sector allocations could offer insight into the divergent performance between these two benchmarks. From our perspective, that estimation still holds. While sector weightings can change, they may provide unique insight into recent performance trends, in our view.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P SmallCap 600 Index is an unmanaged index of 600 companies used to measure small-cap U.S. stock market performance. The S&P SmallCap 600 Pure Growth Index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest growth characteristics based on three factors: sales growth, the ratio of earnings-change to price, and momentum. It includes only those components of the parent index that exhibit strong growth characteristics, and weights them by growth score. Constituents are drawn from the S&P SmallCap 600 Index. The S&P SmallCap 600 Pure Value Index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics based on three factors: the ratios of book value, earnings, and sales to price. It includes only those components of the parent index that exhibit strong value characteristics, and weights them by value score. The respective S&P SmallCap 600 Sector Indices are capitalization-weighted and comprised of S&P SmallCap 600 constituents representing a specific sector.  

Download a PDF of this post, please click here.

Posted on Tuesday, February 27, 2024 @ 2:24 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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