Growth vs. Value: The Great Divide
We are seeing things that we haven’t seen since 2000 – buying on leverage, no earning stocks selling for crazy multiples of sales, and stocks with solid businesses not participating. The difference between growth stocks and value stocks has become as wide (or wider depending on your measurement) than 2000. Over long periods of time (1993 through 6/30/2020), profitable/cheap global companies have outperformed low profitable/expensive companies by 9.5% annually. However, over the past few years profitable/cheap companies have lost more than 20% of their stock value while low profitable/expensive companies have appreciated more than 50%. All we can say is that growth stocks outperformance is excessive and that excess will eventually break and value stocks will outperform.