Chart of the Day: Value Set to Dominate Growth?

Two traders’ acronyms have dominated the past five years. The first, of course, is FAANG. The large-cap technology growth stocks Facebook, Amazon, Apple, Netflix, and Google (Alphabet).

And the second is BTFD, which stands for “buy the…” ahem… “dip.”

For the past five years, a strategy of aggressively BTFD on the FAANGs has been a winner. And, more broadly, growth stocks in general have utterly crushed value stocks over that same period.

A dollar invested in in the S&P 500 Growth ETF in April of 2013 would be worth $1.86 today. That same dollar invested in the S&P 500 Value ETF would be worth only $1.48 today.

But growth doesn’t always outperform, and most studies have shown value investing to be the better strategy over time.

As a case in point, consider the four and a half years corresponding with the bottoming of the tech bust in early 2003 and the pre-meltdown top in 2007. You would have doubled your money in value stocks but only made 63% in growth stocks.

Now ask yourself the following question: What are the next five years more likely to look like?

In the late 1990s, large-cap tech stocks were the only game in town. But their overvaluation by 2000, and the subsequent crash, set the stage for value stocks to enjoy a fantastic run.

I see a similar situation unfolding today, and I’m positioning my portfolios accordingly.

In fact, I launched a new service – Peak Profits – specifically to seek out high-quality value stocks that are trending higher. Stay tuned for more details on how to subscribe.

Charles Sizemore

Charles specializes in finding value opportunities and income plays outside of the mainstream stock market.