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VUG: The U.S. Growth Boom Faces Major Headwinds

Apr. 04, 2022 12:03 PM ETVanguard Growth Index Fund ETF Shares (VUG)
Stuart Allsopp profile picture
Stuart Allsopp


  • The VUG seeks to track the performance of the CRSP U.S. Large Cap Growth Index, which selects stocks based on six growth factors.
  • While the VUG holds the who's who of great American companies that will likely remain market leaders for years to come, there is always a fair price for any asset.
  • At 39x trailing free cash flow, this ETF is anything but fairly valued.
  • Even if profit margins remain at their current record high level and revenues continue to grow at their historical rate of 5%, this would leave the CRSP U.S. Large Cap Growth Index overvalued for years, if not decades, to come.
  • My short positions in the VUG are not held in isolation, but form part of an overall portfolio designed to benefit from a narrowing in the valuation gap between U.S. growth stocks and international value stocks, while reducing overall volatility.


Petrovich9/iStock via Getty Images

In my previous article on the Vanguard Growth ETF (NYSEARCA:VUG) I argued that we were near a peak in the extremely overvalued growth segment of the U.S. market. After rallying another 10% to new all-time highs

This article was written by

Stuart Allsopp profile picture
I am a full-time investor and owner of Icon Economics - a macro research company focussed on providing contrarian investment ideas across FX, Equities, and Fixed Income based on Austrian economic theory. Formerly Head of Financial Markets at Fitch Solutions, I have 15 years of experience investing and analysing Asian and Global markets.

Analyst’s Disclosure: I/we have a beneficial short position in the shares of VUG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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