Value vs. Growth Investing: The Battle Wages On

by: Eric Fox

The ancient battle between Value and Growth investing continues, with Barron's weighing in with its take on the issue. It's starting to remind me of the Hundred Years' War between France and England or that Star Trek episode where two planets have been at war for five hundred years.

Value Investing has underperformed growth investing over a six month or three year horizon, but Value Investing outperformed in the second quarter of 2009.

The problem with this and all other like statistics is that it artificially categorizes all cheap stock as Value stocks. Barron's uses the Russell indexes to measure performance, and specifically mentions Bear Stearns, Citigroup (NYSE:C), Freddie Mac (FRE), General Motors, Macy's (NYSE:M) and JCPenney (NYSE:JCP) as being particularly harmful to Value investors.

Just because a stock is cheap doesn't make it a Value stock. This is pretty basic and is one of the first things any investor learns after picking up a book written on Value investing.