A Snapshot of Growth vs. Value Investing
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View from the Observation Deck  

  1. Today's blog post is an update of one we do on an ongoing basis. On a year-to-date basis, growth stocks are significantly outperforming value stocks. 
  2. Growth tends to outpace value when the earnings growth rates of companies characterized as growth-oriented accelerate faster than the pace of earnings for the broader market, such as right after the economy exits a recession.
  3. In today's chart, the S&P 500 Pure Growth Index outperformed its value counterpart in five of the six periods. Growth investing topped value investing for the 15-year, 10-year, 3-year, 1-year and year-to-date periods through 10/3/17.
  4. The returns were as follows (Pure Growth vs. Pure Value): 15-yr. average annualized (13.89% vs. 13.19%); 10-yr. average annualized (11.00% vs. 8.73%); 5-yr. average annualized (16.40% vs. 16.61%); 3-yr. average annualized (10.37% vs. 8.14%); 1-yr. (21.12% vs. 20.83%) and YTD (21.39% vs. 10.05%). 
  5. As of 9/29/17, the largest sector weighting in the S&P 500 Pure Growth Index was Information Technology at 32.1%, while the most heavily weighted sector in the S&P 500 Pure Value Index was Financials at 36.9%, according to S&P Dow Jones Indices. 
  6. YTD through 10/3/17, the S&P 500 Information Technology Index posted a total return of 27.74%, compared to 13.82% for the S&P 500 Financials Index, 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 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. Constituents are drawn from the S&P 500 Index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks (currently 505) used to measure large-cap U.S. stock market performance.

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Posted on Thursday, October 5, 2017 @ 3:27 PM

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.