the_Bird

Growth vs. Value: Death of a Paradigm?

The whole "growth" versus "value" split strikes me as odd. First, as an investor you obviously want both growth AND value.

More fundamentally, these labels strike me as basically just being code for industry groups; you know that if you buy a "growth" fund, you'll own a lot of technology companies, and a "value" fund will have a lot more banks. If you define "value" based on a P/E or P/B ratio, does it have any real meaning if certain industry groups are ALWAYS represented in the value camp because of the sector's intrinsic characteristics? Not too many "growth" utility stocks.

Don't "growth" and "value" just become labels for certain industries?

What strikes me as inherently MORE interesting (although I have not been able to study this in great detail yet) would be to instead cleave the equity universe into "momentum" versus "contrarian" stocks; stocks that have over a given period of time performed strongly versus those that have done weakly.

Seems like there's a lot of evidence that in the short term, what's worked has tended to keep on working, but over the longer term a contrarian approach may be more profitable. I'd love to see someone really study the interaction between these dynamics.

There obviously would be a lot more turnover, so a momentum-index or contrarian-index fund might be less practical.