Is Growth the New Value?

When it comes to active equity management, growth stocks have outperformed their value peers — and at least one manager thinks that trend will continue, and not just for cyclical reasons.

Brad Neuman高级副总裁和客户投资箍tegist at growth-focused investment firm Alger, argues that growth stocks have persistently outperformed value stocks over the past decade as a result of a slow growth environment and speedier innovation, based on his own research. What’s more, says Neuman, a key metric for choosing value stocks — book value, or a company’s assets minus its liabilities — is becoming less relevant than it used to be in choosing how to value companies.

That’s because research and development is not capitalized in book value, the traditional measure used by value investors, he says. He notes that tech companies like Alphabet or Amazon often have fewer assets on their balance sheets than a company like General Motors, which requires manufacturing plants and large offices to operate. While tech giants often spend significant money on research and development, this isn’t captured in the book value, he said.

According to Neuman, spending on intangible assets has increased, but it’s not captured on a balance sheet, and thus not in the price-to-book value of a company. As a result, many value investors are losing out on major tech stocks.

“The nature of businesses is changing,” Neuman tells Institutional Investor. “Accounting measures aren’t keeping up.”

Companies like Netflix, Facebook, and Amazon have exploded as consumers have quickly adopted their technology. This has, in turn, driven the NASDAQ — which hit an all-time high this week — even higher.

The Alger research showed that U.S. stocks with low price-to-book value have fallen roughly 20 percent since 2007, signaling that book value is becoming a less relevant measure in stock picking.

“Valuations aren’t working in the same way as they used to,” said Neuman.

根据高盛萨赫斯报告，2007年之前，2007年以前的股价购买被低估股票及销售股票股票的策略相比之下，根据事实数据通过6月30日的Arger分析，Russell 3000指数中的增长股在过去十年中，在过去的十年中，在过去十年中的价值股价优于45％。

The dotcom bubble was the most recent cycle during which value investing fell out of favor. Internet stock prices soared, regardless of the technology behind what they did. Until, of course, the bubble burst. This time is different, Neuman argues, because tech companies are innovating at a faster clip than ever before. Rapid innovation by growth companies, including Amazon and Google parent Alphabet, is driving better returns, Neuman says.

“That’s a tailwind for growth stocks, but a headwind for value stocks,” he adds.

游戏中还有其他因素。根据Alger Research的说法，减少消费者债务比率和较低的利率促使增长股票的价值。高盛报告指出，经济增长较慢的经济增长使得增长股票对投资者更具吸引力。

“The fact that value has fared poorly in recent years accords with this cycle’s exceptionally slow growth and prolonged length,” according to the report, which was authored by equity strategist Ben Snider and others. The report’s authors noted that the “lower for longer” approach to interest rates encouraged investors to focus on growth stocks.

Lori Heinel, deputy global chief investment officer at State Street Global Advisors, argues that the swing toward growth investing won’t last forever.

“When the market is suspicious, you’ll see growth outperform,” Heinel tells Institutional Investor. “It shouldn’t surprise us that where the economic outlook remains pretty muted we see growth stocks do well.”

Heinel says these conditions could change when investors become more confident in the market.

“We’d make an argument that value will do better as we become more confident in the future growth outlook,” she says.