Stock market pundits are telling investors that value stocks are a deal compared to growth stocks, and that investors should move money from growth to value.
This month I will take a deep look into the “value is better than growth thesis” and analyze if that is actually the case.
But first, let’s define growth stocks and value stocks, in my own words:
Growth Stocks are companies with opportunity to grow fairly rapidly over the long-term (3-5 years). Typically smaller and in up-and-coming industries. Profit growth rates are 15% and above.
Value Stocks are companies that have already grown up, perhaps over a period of decades. Profit growth might be 10% a year (or less) and these stocks often pay dividends. These can also be termed Blue Chip stocks.
Now let’s look at the valuations of some popular value stocks, and see if they really are the deals some claim they are.
