Value versus growth? Sometimes, it’s hard to tell the difference. And sometimes, it may depend on what index you are using.
Is Microsoft a growth or value stock? Most investors would say it’s a growth stock, because it has the traditional characteristics of a growth stock: earnings are growing.
But Microsoft is now being classified as partly a growth stock by Standard & Poors, and partly a value stock.
What about Meta? It too was considered a classic growth stock. Not anymore. S&P now says it is 100% a value stock.
Is ExxonMobil a growth or value stock? It has for some time been associated with value, which has been associated with companies that paid high dividends, had a lower P/E ratio and usually a lower price to book ratio. But ExxonMobil is now 100% classified as a growth stock by S&P.
And not just Exxon: Chevon, ConocoPhillips, Williams, Coterra Energy, Marathon Oil, and EQT (all energy stocks) are now considered pure growth stocks.
What gives? In the world of style and index investing, it’s not all black and white. And things don’t stay the same.
‘Value is Dead’ and the triumph of indexing
In an interview on CNBC last week, Greenlight Capital founder David Einhorn said, “Value investing as an industry is dead …The money has moved from value investors to index funds and it’s not coming back.”
He’s certainly right about one thing: a decade of outperformance by growth stocks has left a smaller pool of value investors, and much of the value investor money (and a lot of other people’s money) has moved to indexing.
Because of the triumph of indexing, many investors don’t try to buy individual stocks they think represent growth or value anymore. They just buy indexes, or more accurately mutual funds or ETFs that track those indexes.
There are several large growth and value ETFs that have attracted big money: The iShares S&P Growth and the iShares Value are based on indexes developed by Standard & Poor’s.
There are also the Vanguard Growth and Vanguard Value…
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