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A Snapshot of Growth vs. Value Investing
View from the Observation Deck
We update this post every few months so that investors can see which of the two styles (growth or value) are delivering the better results.
The most recent results show that value stocks have significantly outperformed growth stocks on a 1-year and year-to-date basis.
Having said that, the S&P 500 Pure Growth Index outperformed its value counterpart in four of the six periods featured in the chart above.
The total returns through 9/9/22 were as follows (Pure Growth vs. Pure Value): 15 year avg. annual (11.59% vs. 8.69%); 10 year avg. annual (14.01% vs. 12.14%); 5 year avg. annual (12.08% vs. 8.89%); 3 year avg. annual (12.29% vs. 10.64%); 1-year (-17.80% vs. 6.92%); and year-to-date (-20.79% vs. -0.33%).
As of 8/31/22, the largest sector weighting in the S&P 500 Pure Growth Index was Information Technology at 36.6%, according to S&P Dow Jones Indices. The largest sector weighting in the S&P 500 Pure Value Index was Financials at 29.8%.
From 12/31/21 through 9/9/22, the S&P 500 Information Technology Index posted a total return of -20.97%, compared to -11.21% for the S&P 500 Financials Index, according to Bloomberg. The S&P 500 Index was down 13.72% over the same period.
At a combined weighting of 27.3%, the S&P 500 Pure Value Index's exposure to Energy, Utilities and Consumer Staples was significantly higher than the 10.3% combined weighting in the S&P 500 Pure Growth Index as of 8/31/22, according to S&P Dow Jones Indices. They are the three best-performing sectors so far in 2022.
From 12/31/21 through 9/9/22, the S&P 500 Energy, Utilities and Consumer Staples Indices posted total returns of 48.99%, 9.81% and -2.92%, respectively, according to Bloomberg.
Value stocks have tended to outperform growth stocks when the yield on the benchmark 10 year Treasury note (T note) rises, and vice versa. For the 12 month period ended 9/9/22, the yield on the 10 year T note rose 201 basis points to 3.31%, according to Bloomberg.
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 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P 500 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 500 Index. The S&P 500 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.
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Tuesday, September 13, 2022 @ 11:10 AM
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.